When someone tries to sell you on a flat tax, run—don’t walk—to the nearest exit.

If you look at the tax code (just that part of tax law written by Congress; i.e., not including all the regulations issued by the IRS or all the case law decided by judges), you will find hundreds of pages. Depending on how fine the print is, it may run over a thousand pages. Of that, only a page or two is devoted to the tax rates, and tax rates are what flat tax proposals are about (flattening the number of tax rates). So, 99.8% of the tax code has nothing to do with those tax rates or a flat tax. What is that 99.8%?

Granted, taxes are complicated, but tax computations come down to a simple formula: Tax Rate x Taxable Income = Tax. That 99.8% is all about what constitutes taxable income. You can see that on your own Form 1040 you file each year. Most of it is devoted to defining the all important taxable income (add this, subtract that). There is a brief line about computing the tax, and then there is a little more stuff which adds or reduces the tax (credits and so on). If you blink, you will miss the part about tax rates.

Looking at case law, you won’t find anyone litigating the issue of tax rates. They are what they are. The Gov’t and taxpayers are arguing about income or deductions. If you are unlucky enough to be audited by the IRS, you won’t hear the issue of tax rates come up. All the auditor wants to talk about is income and deductions. The definition of income—that’s where the issue of fairness is decided.

You can reduce all the tax rates down to a single bracket (say, 10%). But you won’t have simplified the tax code or made it fairer. Flat tax proposals are a cynical deception perpetrated by politicians playing the magician’s game: creating beguiling illusions by diverting attention away from what is actually going on. If a flat tax is instituted, the loopholes and favors, and people who make a million dollars a day who pay less will all still be there, because a flat tax isn't about the definition of income, it's about tax rates.

Again, if you hear someone selling you a flat tax, smile, hold onto your wallet, and have nothing more to do with the man. Shake off the very dust from your sandals.