A FLAT-TAX FUTURE

It has been said there are but two things in life that are certain: death and taxes. It may be so. But for the bulk of this nation's history, taxes weren't the costly cluster of complexity they are today.

It wasn't until 1913 that 38 states approved the 16th Amendment to the Constitution allowing Congress to collect income taxes. But even then the income tax was a flat tax collected on incomes that exceeded $82,000 in today's economy. Things certainly have changed.

While income tax rates have risen, the segment of the population exempt from taxes has shrunk. At the same time, the tax code has swelled into a multi-volume collection of convoluted laws that accountants have difficulty deciphering, not to mention taxpayers.

Last year several politicians -- mostly Republicans -- began floating the idea of a much simpler system of taxes. Various flat-tax plans, which could be calculated on a 3-by-5 index card, began to gain support in the new Republican-controlled Congress. There now are at least three prominent flat-tax proposals by Republican presidential hopeful Steve Forbes, by Sen. Phil Gramm who recently pulled out of the presidential sweepstakes and by Rep. Dick Armey.

All three would greatly simplify the tax code and provide a tax break for the majority of taxpayers.

The obvious question becomes, "If everybody gets a tax break, who will make up the difference?" It can be a difficult question to answer, particularly given the constraints of a presidential campaign. It is much easier to declare a "no new taxes" or a "balanced budget" pledge in 10-second radio and TV sound bites than to explain the complexities of incentives and trade-offs incumbent in our tax code.

As president, Ronald Reagan proved that lower effective tax rates can raise tax revenue. With a lower rate, there is less incentive to shelter income and more reason to invest in the economy. A growing economy produces jobs, which produces income for taxpayers that is reflected in rising tax revenue.

But any flat tax that lowers rates for most Americans must coincide with a balanced-budget plan. As Reagan said in a 1982 speech to the National Association of Realtors, "We don't have a trillion-dollar debt because we haven't taxed enough; we have a trillion-dollar debt because we spend too much."

Even if tax revenue rises, this nation won't be able to carve into its staggering debt without reforming entitlement programs, which are the fastest-growing segment of the federal budget.

With or without radical tax reform such as a flat tax, Congress must attack spending for entitlements like Medicare, Medicaid and Social Security. The survival of these programs is questionable unless we expect to levy unimaginable taxes on future generations of Americans. Once it is willing to bite the bullet on entitlements, Congress should consider the benefits of a simpler, flat tax that in the long run will fuel the economic expansion needed to mitigate the pain of necessary budget cuts.