What it means
Forbes magazine was founded in 1917 by Steve Forbes's grandfather, and the family has been associated with it ever since. Steve Forbes became its editor-in-chief and led the company as it grew into a media group covering business, investing and entrepreneurship.
The publication is well known for lists such as its rankings of the wealthiest people and largest companies. His political campaigns drew attention because he funded them largely with his own money and made a flat tax the centrepiece of his message.
A flat tax applies a single rate to income above an allowance rather than a series of rising rates. Supporters argue that it is simpler and encourages work and investment, while critics argue that it can shift the burden away from higher earners.
As a commentator, he has regularly written about taxation, monetary policy and economic growth, often favouring lower taxes and a stable currency. These are positions with which many economists agree and many disagree, and they are best treated as one viewpoint in a wider debate.
A reader should look at the arguments and the evidence rather than the label of the person advancing them. For non-finance professionals, the practical interest lies in two areas.
The first is how a flat tax would change a household's or company's tax bill compared with a graduated system. The second is how business media shapes opinion, because lists and rankings can influence reputation and investment attention.
The nuance is that opinions on tax policy are contested and change over time. Any specific proposal should be judged on its own numbers, including the allowance, the rate and how the lost revenue would be replaced.
This entry describes his public role and does not endorse any policy.
In practice
Real-world examples.
Example
A tax policy student compares a flat tax with the current graduated system using a simple spreadsheet. She tests households with incomes of $40,000, $90,000 and $300,000 and finds how each outcome depends on the allowance. She concludes that the allowance matters as much as the rate.
Example
A small business owner reads a business magazine's annual list of the largest private companies. She uses it to benchmark her own growth rate against firms in her sector. She treats the list as a starting point and not as a precise ranking.
Example
A communications manager at a start-up is delighted when the company is featured in a well-known business publication's list of up-and-coming firms. Within a month the website receives more traffic and two investors ask for meetings. The finance team notes the effect when forecasting marketing returns.
Formula
Calculation
Flat tax payable = flat rate x (income - allowance)
Consider a hypothetical flat tax with a 15% rate and a $30,000 allowance, the type of design associated with flat tax proposals. A household with income of $90,000 pays 15% x (90,000 - 30,000) = 15% x 60,000 = $9,000, an average rate of 9,000 / 90,000 = 10%. A household with income of $300,000 pays 15% x (300,000 - 30,000) = 15% x 270,000 = $40,500, an average rate of 13.5%. The allowance makes the system mildly progressive, even though the statutory rate is a single 15%.Case study
Seen in the real world.
Harlow Press is an illustrative, fictional business publisher that launched a yearly list of fast-growing private companies. At first, it was a small feature and attracted little attention.
After three years the list had become a recognised benchmark, and companies began buying advertising and event tickets around it. Revenue from the list and related events grew from $400,000 to $3,500,000 a year.
The publisher's finance director noted that the value of the list depended on its credibility, since a single error or perceived bias could damage it. The illustrative lesson is that media brands are built on trust, and the trust is an asset that never appears on the balance sheet.
Watch out
Common mistakes.
- Assuming a flat tax means everyone pays the same percentage of income, when an allowance usually makes the average rate rise with income.
- Treating one commentator's views as settled economics, when tax policy is debated and evidence varies.
- Treating a magazine's wealth or company rankings as audited financial data, when they rely on estimates and publicly available information.
Questions
People also ask.
Who is Steve Forbes?
He is chairman and editor-in-chief of Forbes Media and a former candidate for the Republican presidential nomination in 1996 and 2000.
What is a flat tax?
It is an income tax with one rate, usually applied above an allowance, in contrast to a graduated system with several rising rates.
Why does the Forbes brand matter to finance people?
Its lists and articles are widely read and can influence perceptions of companies and wealth.
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