The negotiations over raising the U.S. debt limit have centered on tax policy. If Congress could settle on a flat tax policy it will benefit everyone. A flat tax is more rigorous since it taxes everything from the first to the last dollar at the same rate. That rate is chosen politically, and it should be set to bring revenues and expenditures into balance. A progressive tax, like the one we have now, is far harder to administer than any flat tax. It depends on the person who earns the income and the year in which that income is received. Given the taxing difference between high and low brackets, high net-worth taxpayers have strong incentives to shift their taxable income to their low income relatives, artificial tax entities, into low income periods, or all three.

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