EDITORIAL\The presumption tax\Forbes' flat tax is based too much on theory.

Never underestimate the political power of a simple idea - not in this frustrated and angry climate.

The current fascination over a flat tax is the latest example of how a reasonable-sounding but untested concept can become an overnight sensation.

Steve Forbes obviously is on to something: namely, the need for an overhaul of the tax code. But in our view, "overhaul" does not mean "dismantlement," which basically is what the flat taxers are after.

No matter how hard it's peddled, there is no guarantee that a flat tax would generate the sort of economic growth that Forbes keeps talking about. That a modified version seems to be working in Hong Kong hardly represents a prima facie case for the much larger U.S. economy.

Undeniably, there is an appeal to the basic idea. With a single tax rate for all income above a personal exemption (17 percent under Forbes' plan), there would be no more loopholes, no more wildly divergent tax rates, and for lots of upper-income earners, a substantially smaller tax bill.

Here's the theory: If workers and businesses can keep more of what they earn, there will be more investment of that money - and as a result, more growth.

It sounds reasonable enough - except we're not convinced that the numbers pencil out.

Jack Kemp, one of the pioneers of the movement, keeps insisting that a flat tax can actually double the rate of economic growth. This strikes us as more wishful thinking than sound forecasting.

Right now, the nation's annual rate of growth is 2.5 percent; doubling that to 5 percent would be an immense leap. The United States has never come close to growing that fast; since 1870, the annual rate of growth has averaged 3.3 percent.

Why is growth such a big deal? Because it's the basis for the entire plan. Cutting the tax rate to 17 percent would, by anyone's measure, spur a huge drop in tax revenues. The hope is that this would be more than offset by more growth (which would then generate additional tax dollars).

But if growth isn't as strong as anticipated, Washington would be faced with an unexpected shortfall. That means higher deficits and no chance of a balanced budget. It might take a flat tax of at least 25 percent to prevent such a scenario - a prohibitive figure, both politically and practically.

And speaking of politics, we have to wonder how middle-income earners will feel when they face the elimination of long-accepted tax breaks - starting with deductions for mortgage interest.

Many a typical tax bill could, in fact, turn out to be a wash - with the lower tax rate offset by the loss of deductions. Which could cause many Americans to understandably ask: What's in it for me?

We are not arguing against tax reform. A marginal tax rate that peaks at 39.6 percent - not counting state and local taxes - is far too high and only leads to the creation of more loopholes. Lowering the top rate to a realistic figure - say 28 percent - and eliminating special breaks would be a major step forward.

So would deferring, or even eliminating, the tax on all investment income - including dividends, interest and capital gains. Being taxed twice - once for money you earn and then for investing those dollars - long has been an inequity in need of reform.

These are substantive steps, but they don't involve walking off a taxation cliff. To us, that's too risky a step - and not the answer to our fiscal woes, no matter how hard Steve Forbes tries to convince us otherwise.