Epstein Argues for Flat Tax on Consumption

The Flat Tax Solution
Richard A. Epstein
Defining Ideas
November 20, 2012

This past Friday, I gave the “Presidential Address” at the Southern Economic Association (SEA) in New Orleans, on the topic of what President Obama’s reelection means for the future of liberty in the United States. As a classical liberal, my outlook is best captured in one simple proposition: a system of sound governance needs to promote a mixture of individual liberty and private property in order to allow individuals to maximize the gains from individual effort and social cooperation.

A strong government that can protect these rights must, of course, backstop the market system by collecting tax revenues that are spent on the public goods that markets cannot easily or efficiently supply, such as defense and social infrastructure. The use of state power always opens up the path for general abuse because large doses of government discretion allow all political forces to secure factional gains that result in overall social losses. The central challenge for government is to incur minimum political distortions while allowing taxes to raise the revenues needed to discharge essential government functions.

Taxation vs. Factions

There are two ke