IS THIS TAX FLAT UNFAIR?

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In this highly charged debate, a commission chaired by former Housing Secretary Jack Kemp (a Forbes mentor) last week ducked almost all specifics even while endorsing the idea of a single-rate flat tax. Meanwhile, tax reformers with other ideas are also stirring. Another G.O.P. presidential hopeful, Senator Richard Lugar, is pushing a national sales tax, which he says would allow him to abolish the irs while scooping up billions of dollars in unreported income from drug dealers and others who now don't pay income taxes--but do buy cars and groceries subject to a sales tax. The downside is that to raise as much money as the income tax, a national sales tax would reach a staggering 20%--a level that in other countries has prompted elaborate evasion schemes.

Lawmakers who favor another version of the sales tax--a European-style value-added tax, or VAT--hope to introduce legislation next month. And Senators Sam Nunn of Georgia and Pete Domenici of New Mexico want to keep progressive tax brackets while exempting from tax all savings and investment. Critics say their scheme rivals the Clinton health plan in complexity and incomprehensibility.

The White House is so tickled by the spectacle of Republicans bashing one another as tools of the rich that it is not inclined to get in their way. "This is class warfare Republican-style," Vice President Gore told TIME. Is a flat tax really such a godsend, he wondered, for the 70% of Americans who do not itemize and thus file a one-page form? As for the burden of complexity that the current system imposes on investors and companies: even proponents of radical tax reform concede that this country has never seen anything so tangled--or so likely to encourage an orgy of special-interest lobbying--as the writing of crucial "transition rules" that would be required to get from the current tax code to something entirely new. For example, capital-intensive companies like automakers would love the flat tax's immediate expensing of new plants that now must be amortized over several decades. But firms with lots of debt (like United Airlines, RJR Nabisco and Time Warner) would lose the tax subsidy for borrowing, and would work hard to slow the pace of change.

For Democrats, staying on the sidelines of the tax-reform debate might be smart politics for now, but it poses risks, perhaps as early as November. Last week's TIME/CNN poll shows that the public wants a simpler, fairer tax system that encourages savings and investment. Although these goals sometimes conflict, they can be balanced. It is possible, for example, to eliminate all deductions, exempt savings and investment from tax, and retain progressive tax brackets; tax expert David Bradford drafted just such a plan, still much admired by tax-reform aficionados, during the Ford Administration. Alternatively, some liberals have suggested a flat tax low enough to cut payments for all, combined with either a tax on accumulated wealth, which several European countries have, or a tougher tax on big inheritances. Steve Forbes wouldn't like either of those ideas. But give him this much: with his single-minded determination and $12 million in TV ads, he has given the debate a lively start.

--With reporting by John F. Dickerson and J.F.O. McAllister/ Washington