As I have even spoken to some liberal friends is don't understand this, it is important to make this point as many times as possible for it to sink in. The flat tax is a regressive tax, as are I believe consumption taxes. Why this is needs to be understood and the same reasoning applies to both of these taxes.
What gives them a certain appeal where even mainstream nonconservative audiences can sometimes be fooled is the notion that a flat tax is better and fairer because it's "simple" and applied equally to all and so fair. As far as simplicity is concerned it would seem that the flat tax is very simple to understand. After all what can be easier to understand than when Steve Forbes called for a 17 percent flat tax when he ran for President in 1996 or now with Herman Cain calling for a 9-9-9 plan?
Part of the virtue of these plans is that they seem very easy to understand. What can be simpler than saying "tax all income at 17 percent" or "tax all income at 9 percent, tax this 9 percent tax on individual and business income and also on all sales purchases?"
Of course as we have seen with 9-9-9 it really isn't at all simple when you start figuring out how it would really work. One trouble with just saying "everybody pay 9 percent" and leaving it there is that there are different types of income and consumption that are subject to tax.
The more you read about the 9-9-9 plan the more it loses the virtue of simplicity. Then too, the most simple plan isn't necessarily the most fair. Like the ultimate endgame of Cain's 3 step plan is having one 30 percent national sales tax to replace everything else. That surely wouldn't be very fair whether or not it would be revenue neutral as Cain claims. When you add the state sales tax as well as the other taxes residents pay-state income, property, etc-many middle and lower income people could see what is effectively a 50 percent tax on their income, state and federal.
The fair notion is a false equivalence. The idea of the flat tax tries to argue that it's fair that whether you make $ 1 billion or $1 million or $50,000 or $8,000 fairness dictates that you pay the same rate. What this ignores is consumption patterns. A wealthy person even if they are a spendthrift doesn't spend the same percentage of their income on consumption that the middle and low income do. There are many who spend all their income on consumption-of necessity. Certainly the consumption of the basic necessities of life costs more for the modest income than the wealthy. So there is no equivalence.
The two unfair things that happen in regressive tax policy is to over tax those with modest income and under tax those with very high income.-because doing so means that there will have to be spending cuts which will take away the programs that modest income Americans depend on. Mr. Cain's plan does both. Most Americans would see, between their federal and state taxes, the tax burden shoot up. Those of the wealthy would drop heavily with the loss in revenues hitting lower income people with a double whammy.