If we had Citizen Dividends, if every adult had a guaranteed basic income, it would be much easier to enact real tax reform. Radical simplification of the whole system would become politically feasible.

One reform proposal that’s extremely popular is the flat tax. “File your return on a postcard,” proponents assert. Eliminate the complications, the tax credits, tax deductions, and such. Today, typically, conservatives love the idea, because it would minimize government intrusiveness and bureaucracy, while liberals reject it, because it would harm the poor and other groups that benefit from tax deductions and other programs.

A flat tax would benefit everyone if we combine it with Citizen Dividends. Here’s how it would work:

Suppose every adult citizen is getting, say, $1,000 a month. That’s $12,000 a year for an individual, $24,000 for a couple. That money could be tax-free, and integrated with the income tax.

A flat income tax would then make good sense. The net effect would be fair to everyone. There would be no need for tax credits, tax deductions, and loopholes. People could file their returns on a postcard.

Plus, the net effect would be clearly and absolutely, in tax jargon, “progressive.” Here’s a chart to illustrate that, using a flat tax rate of 40 percent.

Total Income	Tax - 40 percent	Citizen Dividends	Net Tax	Net Income	Net Tax Rate
0	0	12,000	-12,000	12,000	0
10,000	4,000	12,000	-8,000	18,000	0
20,000	8,000	12,000	-4,000	24,000	0
30,000	12,000	12,000	0	30,000	0
60,000	24,000	12,000	12,000	36,000	20 %
100,000	40,000	12,000	28,000	72,000	28 %
200,000	80,000	12,000	68,000	144,000	34 %
1,000,000	400,000	12,000	388,000	612,000	38.8 %

People who earn, in this example, less than $30,000 would receive a check from the government, a “negative income tax.” (Monthly checks for the very poor, because this would replace most or all welfare programs.) Those with very high earnings would pay close to the full 40 percent. There would no marginal inequities or work disincentives.

There will have to be compromises, of course, regarding the flat tax rate and the amount of Citizen Dividends. Some people will want both to be low, to increase work incentives. Others will want both to be higher, to ensure that the poor and unemployed have adequate income and can provide for themselves. Both figures will have to be adjusted periodically as economic conditions change. The debates about the rates and adjustments, however, will be vastly more simple and sensible than current fights about the tax code.

Though this wouldn’t totally eliminate the IRS and the need to file tax forms, it would radically reduce those burdens. Plus, it will reduce those burdens for employers. That’ll be especially good for small businesses, especially start-ups. So these combined reforms will promote innovation, economic growth, and job-creation because most new jobs are created by small businesses.

Another popular radical tax reforms is the national retail sales tax, which proponents call the “Fair Tax.” It already includes a “prebate” to offset the higher costs of food and other necessities. That prebate could simply be expanded into Citizen Dividends.

Today, unfortunately for almost all of us, real tax reform is nearly impossible. Too many special interests profit from the complications and confusion. Those special interests include lobbyists for just about every big corporation, industry, or group. It’s the complications in the tax code that allow them to insert earmarks and other provisions that benefit their clients.

One of those special interests deserves extra attention: elected officials. They get campaign contributions from the lobbyists. Our representatives often talk about reform, but it’s usually “reform,” something they say to appeal to us, the voters who are supposed to be their bosses, promises they make while knowing they won’t or can’t deliver.

Tax reform advocates, those who are serious about achieving their goals and not just talking, ought to be calling for Citizen Dividends.

Steven Shafarman

Daschle’s mistakes, like Tim Geithner’s, are a good argument for tax reform. If they can’t understand and follow the rules, when both helped make the rules and enforce the rules, and both earn lots of money and can afford to hire accountants and tax attorneys, it makes no sense to expect us ordinary Americans to do any better.

The Obama administration ought to be calling for radical tax reform and simplification. But they and other elected officials are doing just the opposite. They’re not telling us that, of course, but history is clear. Whenever politicians propose new tax credits, deductions, or similar “reforms,” the overall impact is to make the tax code more complex. The proposed economic stimulus package is sure to add lots of complications.

That’s another reason to support for basic income. When everyone has a basic income for food and shelter, it will be a lot easier to reform and simplify the tax code.

First, there will be less perceived need for tax credits and deductions that serve only some people. Everyone will have an income for food and shelter, extra income in addition to what they earn. It will therefore be a lot harder for special interests to rationalize the tax credits.

Second, everyone will have greater means and incentives to work together as We the People to demand reform. We the People, when we organize and work as such, representing our common interests, are much more powerful than any special interests. Thus, advocates for tax reform and simplification will be much more likely to succeed if they make basic income part of their proposal.

Here’s one possibility: We can combine basic income with a flat income tax. If the basic income amount is tax free, say $12,000 a year, for every adult citizen, that could replace the deductions and tax credits. There could be a flat tax, say 20 or 30 percent, on all earnings. No exceptions, no deductions, no tax credits. The net effect would be perfectly fair, with no marginal variations or inequities. Fair. Simple. Just. Easy.

This may be the only way to achieve those goals, which proponents of tax reform sometimes claim are incompatible.

How do we get the Post, Times, and other media outlets to report on basic income? How do we get tax reform advocates to appreciate the power of basic income, they way it can make their proposals more sensible and effective and politically palatable, and to make it part of their proposals?

The first step, of course, is to circulate this post and help spread the word. Thanks.

Steven Shafarman