Spitting on the Flat Tax? Jude Wanniski June 10, 1998

Memo To: Joe Klein
From: Jude Wanniski
Re: “Flat tax”

In one of your recent New Yorker political pieces you took a gratuitous slap at “Steve Forbes’s worst idea, the flat tax.” You know how much I admire your reporting, Joe, so you will forgive me I hope if I point out that this side-of-the-mouth pitooey on the flat tax was most uncharacteristic of your best work. Normally, when Joe Klein spies an idea he thinks is well below par, he gives us an inkling why he has come to that conclusion. In this case, here you came, out of the blue, pitooey on the flat tax, and not another word.

Let me hasten to add that I’m not a flat-tax fanatic, although if one showed up on the President’s desk and he signed it, I wouldn’t mind. I think it would be far better than the 8 million words we have. This abomination of a tax code, now 85 years old and aging, requires millions of our sons and daughters to spend their lives in tax law, accounting, IRS agentry, criminal courts and the prison system -- when they might be more usefully employed writing poetry, novels, or motion picture scripts.

Nor should you smear Steve Forbes in so casual a fashion for having come up with the idea. Steve would readily admit, if you took the trouble to ask, that it came from two economists at Stanford, a Republican named Alvin Rabushka and a Democrat named Robert Hall. The Republican strand of the idea jointly conceived by this odd couple came to Steve via House Majority Leader Dick Armey, a Ph.D. economist from Texas, who credited Rabushka and Hall in the legislation he introduced in the 104th Congress. The Democratic strand of the idea developed via one of Professor Hall’s students, Michael Weinstein, who joined the editorial page staff of The New York Times in early 1989. Actually its first political parent on the national scene was former California Governor Jerry Brown, a bona fide Democrat, who embraced the essential elements of Rabushka-Hall in his moonbeam campaign for his party’s presidential nomination in 1992. Although Weinstein of the NYT editorial page had written favorably about the flat tax, he was intellectually conflicted because his editors had already decided they didn’t want Governor Moonbeam in the Oval Office. After Jerry Brown swept to a stunning victory in the Connecticut primary, the Democratic Establishment ganged up on him, with Senator Moynihan announcing that the Brown flat tax would destroy the Social Security System as we know it. The NYT joined in the attack. This scare tactic was enough to send New York Democrats screaming to Bill Clinton, who promised he would not destroy Social Security as we know it.

The essence of the flat tax idea is its simplicity around its TWO distinct rates: zero and some percentage near 20. The zero rate applies to lower-income families and would include two thirds of the entire population. The chief opponents of the idea are those employed in the chaos industry, who would have to find new work if their skills were no longer needed. There is the possibility, perhaps small but I think real, that our government will be forced to adopt a simplified system such as the flat income tax of Forbes/Armey in order to provide sustenance for the government in the year 2000, when the complexity of the current code causes a breakdown at the Internal Revenue Service. You should suggest this idea to your editors at the New Yorker and look into it. It would make interesting reading if you approach the subject without prejudice, which I know you can do.

P.S. Your piece on China in the June 15 New Yorker, I’m happy to say, is up to your usual high standards.