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Home > Journals > Michigan Law Review > MLR > Volume 101 > Issue 6 (2003)

 

Abstract

Over the last decade, it has become increasingly evident that our current federal income tax is too complex, too easily evaded by the wealthy, and too likely to distribute the burdens of taxation to the people least able to bear it. Several years ago, frustration with these realities led to a groundswell of reform proposals, ranging from replacing the current graduated income tax rates with "flat," or proportionate, rates to abolishing the income tax altogether in favor of a national sales tax. While this tax reform frenzy dissipated almost as quickly as it began, the seeds of discontent remain. Professor Edward McCaffery seeks to revive the tax reform debate in Fair Not Flat: How to Make the Tax System Better and Simpler. In his book, the University of Southern California law professor proposes combining elements of both the flat tax and sales tax proposals of the mid-90s. The twist in his proposal is that he abandons the flat rate that most politicians and commentators erroneously characterized as the most significant innovation of the flat tax. The flat rate always concealed the more radical proposal to exempt savings and investment from the tax base. McCaffery should be commended for highlighting this feature and acknowledging its true significance. In doing this, however, he forgoes the flat tax's rhetorical appeal by explicitly embracing the introduction of progressivity through graduated rates. The proposal is therefore unique in the politically charged world of tax reform because it combines features that should be appealing to members of both ends of the spectrum. For liberals, it embraces the progressive ideal of the modern income tax. For conservatives, it fully exempts savings and investment from taxation and therefore operates as a consumption tax. It appears to be the perfect compromise - a progressive consumption tax.

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