Ken Blackwell: Higher Taxes, Lower Wages

Jesse Taylor — Mon, 26 Jun 2006 14:59:19 -0700

Cross-posted from http://www.tedstrickland.com/blog

With Ken Blackwell declaring his support for a statewide flat tax, it's time to take a look at what his ideological compatriots say about similar ideas. Blackwell was a research analyst at the Heritage Foundation, a conservative think tank. Let's look at the Heritage Foundation's "friendly" critique of flat taxes.

On businesses:

However, they would see their tax burden rise by about two-thirds, on average, from around 31 percent of the total tax burden to around 50 percent. This tax increase on businesses would result from the loss of deductions for state and local taxes and for employee fringe benefits, among other things.

Though businesses will try to pass on these costs to consumers and employees -- by raising prices and trimming fringe benefits, for example -- shifting the nation's tax burden to the business community will not produce successful tax reform.

On the middle class:

Next, the flat tax initially would raise taxes on the middle class by 20 percent. On average, a family with between $40,000 and $50,000 in adjusted gross income would see their taxes rise by about $700 -- to about $7,500.

On fairness:

The flat tax appears also to have a major fairness problem. Consider two families. The Joneses have a combined salary of $50,000 in wages. Under the Armey flat tax, a 20 percent rate would cost this family $3,700. Now consider the Smiths, who in retirement consume every dollar of their $1 million in dividend income. Under the flat tax, the Smiths owe no tax at all because capital income is excluded from the tax base.

Obviously, the numbers here change a bit for state taxes, but you run into the exact same problems - higher taxes on working families and business.

Ken Blackwell promises a terrible one-two blow to Ohio's economic future - higher taxes and lower wages for Ohio's consumers.

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Ken Blackwell: Higher Taxes, Lower Wages