Now That’s Just Dumb

House Ways and Means Committee Chairman Dave Camp of Michigan and others are quietly floating the idea of accepting a slightly higher tax on capital income in order to win support from Democrats on tax reform.

“Capital income” includes both capital gain and dividend income.  But if you raise the taxes on investment, you’ll get less of it.  Any high school student of economics knows this.

[C]ommittee insiders in the House tell us that Republicans have been weighing the trade-off between higher taxes on capital in exchange for lower rates on wages and salaries and small businesses.

To what end?  This tax policy just distorts the market and our economy, even more than the existing tax-code-as-social-engineering-tool already does.

Senate Finance Committee Chairman Max Baucus of Montana, a Democrat, wants to equalize the rates for capital gains and taxes on wages and salaries.  For Democrats, he has said, this is a matter “of basic fairness.”

Fair or not, I agree with the idea of equalizing “the rates for capital gains and taxes on wages and salaries.”  A flat tax of 10% on all income, regardless of source, does the trick.  And a low, flat tax won’t distort our economy.  Although, it will take away a vote buying tool that members of both parties use for personal political gain: promising “lower taxes” by Republicans and selling tax credits and subsidies by Democrats.  That’s not dumb.

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