Republican presidential candidate Ben Carson told Fox News Sunday that it's "very condescending" to poor people to tax them at lower rates than rich people. He called for a flat tax along the lines of a biblical tithe, in which rich and poor alike pay a tenth or so of their income in taxes.
"Now, some people say it's not fair because, you know, the poor people can't afford to pay that dollar," Carson told host Chris Wallace. "That's very condescending. You know, I grew up very poor. I’ve experienced every economic level. And I can tell you that poor people have pride, too. And they don't want to be just taken care of," Carson said.
What does economics have to say about Carson's flat tax? It's hard to say because the retired neurosurgeon (profiled here by Bloomberg Politics) hasn't fleshed out his concept. Also because "very condescending" isn't a term that economists use very often.
One thing is indisputable: An unadulterated flat tax—which Carson may or may not favor—would raise taxes on the poor and reduce them on the rich. That would almost certainly decrease net national happiness. The reason is obvious: People who are just barely getting by, living from paycheck to paycheck, would find it very hard to pay more in taxes than they do now. People who make a lot of money have far more breathing room. They may not enjoy paying the taxes they pay now, but paying any given dollar in tax is easier for them than it is for someone at the bottom of the income scale. The implication is that the benefit to them of paying less tax would be less than the loss to the poor of paying more. (This is the economic concept of "marginal utility.")
The theory of the flat tax is that it preserves incentives to work and invest because people don't have to pay punishingly high rates on each extra dollar of income. What's sometimes forgotten is that there's no giant increase in taxes when your income climbs into a new bracket. You pay the highest rate only on the portion of income that's above the threshold. The rest of your income continues to be taxed at lower rates—which are detailed here.
There are ways to keep a flat tax from pinching the poor. One is to create a generous per-person exemption—so, for example, the first $25,000 of income per person isn't subject to tax. The granddaddy of flat taxes, proposed in the early 1980s by Robert Hall and Alvin Rabushka of the Hoover Institution, provided that the first $25,500 of wage and pension income for a family of four would be tax-free. A more complicated way is to exempt from the flat tax certain necessities such as food and medicine.
Carson may have some kind of break for the poor such as these in mind. If so he didn't tell Chris Wallace. "It’s a distinct possibility that he hasn’t fully developed his tax plan," says Tax Foundation economist Kyle Pomerleau.
Whether an unadulterated flat tax would be less "condescending" to the poor than today's tax code is more of a value judgment than an economic question. The staff of the bipartisan Joint Committee on Taxation—which serves both Republicans and Democrats in Congress—delved into questions of fairness in a March 3 report called "Fairness and Tax Policy" (available for download here).