The Siren Song of the Flat Tax

The next Republican presidential primary debate on October 28 at the University of Colorado-Boulder, with CNBC, is titled “Your Money, Your Vote: The Presidential Debate on the Economy.” Viewers will no doubt hear the siren song of the flat tax from multiple candidates. Nearly half of the crowded field of contenders either support a flat tax or are reportedly considering the idea. And with good reason—surveys show about a third of Americans, and half of Republicans, want to replace the current progressive income tax system with a flat tax. Yet what is remarkable about the flat tax’s relative popularity is that most Americans also support the principle of progressive taxation and think the wealthy do not pay enough in taxes. Even among Republicans, only a third thinks the wealthy are paying too much in federal taxes.

Replacing the current income tax system with a flat tax would cut taxes for the rich and push those responsibilities onto poor and middle-class people. So why do so many Americans support a policy that contradicts their preferences? And how will proponents of the flat tax appeal to voters who simultaneously support these two very different tax systems?

Our research shows that two-thirds of poor and middle-class supporters of the flat tax wrongly think the tax would either raise or maintain current tax levels for the rich. Importantly, this misunderstanding stems not from a failure of arithmetic but rather from the experience of filing their own income taxes.

Tax season focuses taxpayer attention on deductions, credits, and exemptions. From the home mortgage interest deduction to the earned income tax credit, tax filers at every income level know to keep their eyes peeled for these savings. In the process, interviews suggest, they make the mental leap from their own small exemptions to the accounting tricks of the very wealthy—and assume that these “loopholes” are all that matter for how much one pays.

“I know that I’m probably paying too much because of how I get my taxes done,” said one respondent, a hairdresser in Michigan, who one of us interviewed. “The H&R Block lady is probably not the best at finding loopholes.” And an Ohioan working in information technology complained repeatedly about how complicated the tax system is. “I think the richest pays too little nowadays,” he concluded. “They’ve got their resources to exploit all the loopholes and they end up paying too little.”

With this great focus on loopholes, actual tax rates do not get the attention they deserve. People who know the progressive federal income tax system has brackets and rising rates still doubt that the rates matter for the tax bill of the rich. As one interviewee in Utah said, “If the loopholes were closed and they were actually paying that [flat tax] percentage, as opposed to, you know, having the best lawyers and the best accountants that could find a way to not pay, then I think they would be paying about the same.” A therapist from Atlanta went further. “I think that a flat tax would wind up with the super-rich paying less but if there were no loopholes, I’m not sure,” she said. “They might end up paying more even it were a lower percentage.”

It is these mistaken, but reasonable, interpolations from personal experience that help make the flat tax so appealing. That’s why Republican presidential contenders such as Ted Cruz and Rand Paul can hype a flat tax, even though the policy is at odds with most Americans’ values. What’s more, this siren song for a flat tax happens to resonate the most among a very important voting bloc in the Republican presidential primaries and in the general election. Approval for a flat tax rises steadily with income. With a flat tax, the rich would be laughing all the way to the bank.

Vanessa Williamson is a Fellow in governance studies and The Brookings Institution. Andrea Louise Campbell is a professor of political science at the Massachusetts Institute of Technology.

Morning Consult