By Albert Yee
Republican presidential candidate Herman Cain’s 9-9-9 tax plan proposes a flat income tax that supposedly applies to everyone fairly. It also mandates a sales tax of nine percent, which would be hard on the poor and a business tax of nine percent that corporations would love.
Republicans like the flat tax idea and they never stop proposing it, despite its clear defects. Simplifying tax returns and collection, flat taxes seem reasonable to those who don’t attend to its details and application elsewhere.
Working in Hong Kong for long as a professor and consultant, I paid the territory’s flat tax that fluctuated around 15 percent each year. Salaried as public and non-managerial private employees were in Hong Kong, I had no escape since payrolls showed what I earned.
However, in the private sector, businesses could shade individual incomes for those in their upper tiers. They would pay their bosses and top managers something, but less than one would expect. Most of their benefits would be in personal family and relatives’ housing, utilities, groceries, transportation, children’s education, servants, club memberships, and more.
Corporate- and government-owned housing is pervasive in Hong Kong. When bigwigs celebrated weddings and graduations of their offspring, guess who might pay the expenses of the events? Writing off expenses, corporations, therefore, cut their taxes. Income earned outside of HK was not taxed.
Providing a nice benefit to high earners, corporations could pay their bosses through headquarters and subsidiaries in other nations, especially in those that didn’t tax much or anything. Staffing and funding of Hong Kong’s equivalent of our IRS were low. However, the territory maintained a no-tax threshold that benefited very low-income workers. Husbanding scarce property in one of the world’s highest-density territories, the Hong Kong government supplemented revenue by leasing land at very high prices, particularly in major business areas.
Dr. Albert Yee is a retired professor, psychologist, author and former dean of the University of Montana School of Education. He lives in Missoula, MT. http://www.alberthyee.tateauthor.com