American Taxation

John Steele Gordon is an excellent historian, but when he ventured beyond history and into policy advocacy—particularly his advocacy of a flat income tax (no good just calling it a “flat tax,” Mr. Gordon; we know you mean a tax on income)—he missed his mark, especially when he dismissed the notion of a sales tax as inherently regressive.

He is wrong, for (at least) two reasons: First, people with greater incomes and greater net worth spend and buy more than poor or middle-class people, so they will automatically pay more of a national sales tax. And when purchases are taxed, then the tax reaches not only those with high reported incomes but also those with hidden incomes and high net worth.

Second, and more important, Mr. Gordon has forgotten the purpose of taxation. The real value of any tax is (or should be) that it acts as a disincentive to whatever activity is being taxed.

Thus any tax on income acts to discourage people from working and from earning and saving money. What could be more regressive than that? In this world of overpopulation, depletion of natural resources, cultural and moral poverty, pollution and violence, can’t we think of anything we would rather discourage than employment and thrift?