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Daniel J. Mitchell, an economist and senior fellow at the Cato Institute, was an economist for Senator Bob Packwood and the Senate Finance Committee.
You might think that people won't donate with the adoption of a flat tax rate, but we're here to convince otherwise.
The higher income brackets will have more money to spend, as they will be taxed less than before.
In an article for the "New York Times", Mitchell stated that a flat-tax system is simple and fair. He also said it would eliminate the corruptness in politics.
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Before flat tax rate
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With flat tax rate
An organization of non-profit charitable organizations
An association of home builders
Why are people donating? Not because they want a tax deduction, but because they genuinely care. Even though for some people the new tax rate will hit hard, they're still going to donate because they want to see good in the world.
Keeping the income tax system as it is will increase donations to charitable organizations. By keeping the national tax rate as it is, US citizens get tax deductions if they donate. This means they're more inclined to donate, as they'll be taxed less.
A flat tax system would have every income bracket pay the same income tax. It would eliminate all tax deductions on things such as mortgages and charitable donations.
Keeping the national tax rate as it is will allow home owners to continue taking the value of their mortgage out of their taxable income. They are then more inclined to buy homes.
Think about that dream. That famous dream every American has. The one where the dad bursts through the door of his home after work, to have his kids cling onto his legs with the glee of seeing him. To have his wife come out of the next room, with their newborn baby on her hip. And the home is gorgeous- all their art, and worn-in furniture, and report cards hung on the fridge, and memories strewn throughout every room. I don't think people will give up on this dream. I don't think they'll give up on it because of a flat-tax rate. I think they'll strive and dream for it.
People will continue to buy homes for investments and to just own something of their own. Eventually, everyone will own more money as they're being taxed less, and will want to indulge in luxuries such as more homes.
Elizabeth Weintraaub, a home buying and selling expert, says that "pride of ownership is the number one reason why people yearn to own their home."