Steve Forbes gives Rudy his backing…which doesn’t mean all that much. What’s interesting is that Rudy seems to be flirting with Forbes’ flat tax idea when he had previously condemned it.

From NY Times:

Rudolph W. Giuliani accepted the endorsement of Steve Forbes yesterday and embraced Mr. Forbes’s signature issue, saying he liked the idea of a flat tax � something Mr. Giuliani denounced when Mr. Forbes was running for president.

If there were no federal income tax, “maybe I’d suggest not doing it at all, but if we were going to do it, a flat tax would make a lot of sense,� Mr. Giuliani, who is seeking the Republican presidential nomination, said yesterday, standing beside Mr. Forbes at the Nasdaq MarketSite in Times Square in New York. But he said it was not clear whether dissolving the current system, so ingrained in the economy, would be feasible.

This is what Rudy said in the past…

In 1996, when Mr. Forbes first ran for president, Mr. Giuliani, then the mayor of New York City, disparaged a flat tax in general and Mr. Forbes’s plan in particular. The Forbes plan called for a single tax rate above a certain income, instead of several rates based on income. Mr. Giuliani said that a central part of the proposal, eliminating deductions, would hurt taxpayers in urban areas and reduce tax revenues for populous cities and states.

So there’s that.

Personally, I don’t think Forbes’ flat tax wouldn’t work. It favors the rich too much.

However, some writers for Forbes’ magazine proposed a better flat tax plan a couple years ago and it may be something that Republicans and Democrats alike should take a look at.

I would offer Americans an even lower flat tax rate–14% as opposed to 17%–and at the same time do more to help low-income people. Boston University economist Laurence Kotlikoff and I have put together a plan that works in the following way.

First we’d get rid of the across-the-board $9,000-per-person exemption in the Forbes plan. Why should billionaires like Bill Gates get an exemption? Forbes is giving too much money away to rich people. We’d save that exemption money and give it instead, in the form of a rebate, to the bottom third of earners, those who bring home roughly less than $25,000 for a family of four.

Second, Forbes ignores the 12.4% Social Security payroll tax (split between employer and employee). Currently, income over $90,000 a year is not subject to the tax. We don’t think it’s fair that a $50,000-a-year autoworker has to pay payroll taxes on all his income while a million-dollar-a-year auto executive does not. Under our proposal all wages would face the same income and payroll tax rates.


  • It sort of depends on what your purpose is in doing something like this. I could sit here and propose something on the basis of “fairness” (defined any variety of ways) or “to maximize government receipts” or any of a thousand other ways.

    My own take is to look for a simplification more than anything else.

    How about this:

    $20,000 personal exemption.
    Up to $500 exemption on charitable contributions
    (Maybe keep some sort of home mortgage exemption?)

    Tax rate of 15% on taxable income up to $180,000.
    Tax rate of 22% on the rest.
    Payroll taxes continue until the $500,000 mark.

    The thing is, I have NO IDEA what such a system would do to the government’s take.

    However it strikes me as fair and a hell of a lot easier.

  • wj

    If we’re going to keep Social Security without massive changes (and I’m not at all sure we should, but just for the sake of discussion), not only does it make no sense to exempt income above a certain amount, it also makes no sense to exempt certain kinds of income. Whether it’s earned income, interest, dividends, rents, or whatever, income is income. If you are going to tax it for Social Security, tax it no matter where it comes from.

  • GN

    Thoughts? Well, my my first thought was “Damn Justin, is this what you call a light post?” Then I thought I don’t see what difference a flat tax will make, but I am not an economist. My initial reaction is that the more you have, the more you should pay. I don’t know how much sense that makes because I am not an economist. OTOH, I don’t see any attention in the flat tax being paid to social services. There is a significant difference between the relief proposed for the bottom third earners, but what about non-earners … many of whom are mentally ill or debilitated in some form and are a growing populace. I think the topic in itself might be a little above my capacity, though I find it interesting.

  • bob in fl

    It doesn’t matter what kind of tax system we have. I have seen very many versions of the flat tax in the past 20 years or so. It matters not how fair it is nor to whom. If a tax system is passed by Congress today, in 10 years it will not resemble today’s system at all. Congress will continually “refine” it, just as they have with the current income tax system. So we would end up with the same complicated mess we now have. There is no legal way to keep taxes out of politics, or politics out of taxes, & no practical way either.

    However, there is one way to make a difference in the whole political process. Impose a limit of, say, 10,000 words for any bill introduced to Congress. And the first such bill should be a requirement to word them in plain English. Of course, it wouldn’t even make it into a committee.

  • Jeff Locke

    As posted earlier, the problem with a flat income tax is that it will never remain flat as long as politicians find more inventive ways to spend our money. But there is a plan that will tax ALL that visit and live in America both legally and illegally, in a progressive manner and still remove the regressive nature inherent in any purely consumption-based tax. I mean the Fair Tax plan H.R. 25/ S. 25 as introduced in the 110th session of Congress. This bi-partisan plan untaxes all poverty-level personal consumption through the use of a monthly “prebate”. This ensures the citizen a means to release all poverty-level taxation without resorting to the need for a blizzard of exemptions/deductions.
    A slick method that ensures no Washington D.C. Tax Lobbyist will have an influence on our tax code in the future. And just as important, no need for politicians to waste 50% of their time in Congress dealing with the tax policy. A simple, fair, transparent tax that will remain so. That is head and shoulders above any other tax reform plan proposed. The FairTax is the answer as more and more Americans are coming to find out. Go to and read their “white page” section. Judge it from all angles and you’ll see why this hayseed plowboy endorses the BEST alternative to our current 60,000 page mess we call the current federal income tax code.

  • Rick Johnson

    While the Flat Tax may be better than what we have today, it pales in comparison to the FairTax (HR25). HR 25 will untax the poor via the prebate, be progressive so that the more you spend(not earn) the more you will pay, eliminate the unfair payroll tax, help level the foreign trade imbalance, and finally rid our products of the embedded cost. Finally, our citizens will know the cost of taxes, not have them hidden in every product. The reduction of the IRS to a minor department will be the cherry on the top. Go to to learn more. This bill is at least 1000 times better than what we have now and a 10 year old can understand how it works.

  • Clark Burton

    Here is another YES for the FAIR TAX, HR 25. This legislation might do it in less than 10,000 words too.

  • Richard Brogger

    Over 90 years ago we started with an income tax that was as flat or flatter then most of the current “flat tax” proposals. There is only one current tax proposal that is truly flat and that is the very popular Fair Tax, HR-25. It has just one rate and taxes consumption (as proposed by Alexander Hamilton) instead of income (as proposed by Karl Marx).

  • sleipner

    This fairtax plan sounds like a way to make sure corporations pay even less tax, and also a great way to make sure no one pays any tax on their capital gains income. In addition, I believe it would significantly increase the tax burden on the middle class, while lowering it for the upper class.

    The biggest problem with a consumption tax is that the rich generally tend to spend a much smaller percentage of their income, preferring to invest a large chunk of it, or spending a large percentage on an expensive house, neither of which would generate any tax revenue.

    The best way to fix the tax code (imo) is to remove most or all of the devious loopholes that rich individuals and corporations use to avoid paying anywhere near the amount of taxes that they should be paying. The social security income cap should be removed completely, and capital gains income should be considered as regular income instead of being taxed as a separate much lower rate as it is now. House deductions should be capped much lower – it’s ridiculous that someone can deduct the mortgage for their $50 million mansion.

    I was talking to a Republican friend the other day, who constantly gripes about how some people abuse the welfare system by either going the “welfare baby route” or by collecting while working under the table, etc. The thing he fails to realize is that the total dollar value of all social program fraud is probably less than 5% of the amount lost to the government through tax evasion and loopholes used by the rich and corporations, and probably an even smaller percentage of the amount given to corporations and industries as tax breaks or subsidies – funny that Republicans only dislike welfare when it’s given to poor people.

  • GN

    Ah, Sleipner, there is an interpretation I can wrap my brain around.

  • The FairTax sounds reasonable. Has anyone really looked at the amount of tax US citizens pay vs Europe? I doubt it. Add federal and state income tax, payroll tax, FICA, sales tax, and local taxes plus property taxes. Then, to be similar, add in health insurance taxes and the cost of schooling above the 12th grade (eg, college) and I think you will be surprised that we pay more in taxes and get far less in benefits than any of the western European countries offer, particularly in the quality of health care for everyone, including foreign nationals.
    Why has this been so hard in the US? Because politics depends on large contributors. If that issue is addressed, perhaps laws would be easier to pass and we could catch up to the truly progressive countries (and still keep Capitalism).

  • Rick Johnson commented on the fair tax. Since I first heard Neal Boortz speak of the fair tax I have been a fan. It is sad to me that in today’s economy the government still refuses to take this option to heart. The fair tax would go so far in leveling the playing field. Whether rich, poor, legal, or illegal immigrant you would pay your share. Business would boom and the economy would begin to recover.