Volume
1 Issue 1 - March 2001
Richard Shelby
by: Richard Shelby U.S. Senator - Alabama (Republican)
As Congress convenes and begins its work this year, we are hopeful that the inauguration of a new president will bring new opportunities to reform the cumbersome Internal Revenue Code and reduce the overwhelming tax burden the Code has placed upon American taxpayers.
Since 1986, there have been nearly 6,500 changes to the Internal Revenue Code. This has created a convoluted tax code which penalizes those who are not savvy enough or wealthy enough to pay a professional to work out their tax liability. Furthermore, because the tax code is so complex, even experts - including the IRS - are unsure of what is required to be in compliance with the current law. According to Daniel Pilla, a tax litigation consultant, in 1993 the IRS telephone taxpayer assistance program provided about 8.5 million Americans the wrong answers to even the most basic inquiries about the tax laws. If the IRS cannot figure out the code, how can the IRS expect the American people to do so?
A flat tax will eliminate the complexity and correct the vast and pervasive inequities of the current system by dramatically simplifying the tax code. Rather than wade through stacks of complicated IRS forms and instruction manuals, under a flat tax, taxpayers will file a simple postcard size return. This simple form is easily completed in minutes without the use of expensive professional assistance. The flat tax would decrease the cost of compliance to the government, and would save taxpayers time and money.
With a flat tax, all American taxpayers would be taxed on wages, salaries and pensions at the same rate, 17% when the tax is fully implemented. In place of itemized deductions that often favor special interest groups, each taxpayer would be given a generous standard deduction of $11,000, or $22,000 in the case of filing jointly. Taxpayers would receive an additional $5000 standard deduction for each dependent. Therefore, a family of four would need to make over $32,000 before they would pay a single penny of taxes.
Taxing everyone at the same rate does not mean that the wealthy will pay the same amount of taxes as lower income Americans. People who make more will still pay more under the flat tax. All that is changed is that every American would be treated equally and taxed at the same rate. Under the current law a person with a taxable income of $41,199 is taxed at 15%. However, someone who makes just one dollar more is taxed nearly twice as much, 28% to be exact. Under the flat tax such arbitrary taxation would be non-existent.
Under a flat tax this will end. People will not have to hire an accountant or attorney simply to comply with the law. Everyone will fill out the same simple return, everyone will be taxed at the same rate and everyone will pay their fare share.
The Joint Economic Committee has found that the "flat-rate income taxes are significantly more favorable to economic growth than progressive taxes. Personal income in flat rate income tax states grew at a rate 25 percent faster than did personal income in states with a progressive rate structure."
Enactment of the flat tax would spur economic growth and investment by eliminating the double taxation of savings and promote jobs and higher wages. The flat tax does away with government micromanagment of people's personal finances and allows them to spend, save or invest their hard earned money as they see fit.
The flat tax promotes the American family by eliminating both the marriage penalty which unfairly punishes married couples by forcing them to shoulder a greater tax burden than had they remained single, and the death tax, which has a devastating effect on small businesses. Eliminating the marriage penalty would likely create an increase in income for most families that would allow them to finance family vacations, education and retirement. Furthermore, because the death tax forces many Americans to sell businesses that their family spent a lifetime building people would be able to keep the fruits of their parents and grandparents labor, which are often a hallmark of their heritage.
Perhaps the most important virtue of the flat tax is that it supports the basic values of work, savings and individual liberty. It has been a commitment to these principles that has made America the most successful economy in the world.
The time for major tax reform is now. Proposed amendments to the current tax code only perpetuate the complexities and inequalities of the current system. The flat tax would not only simplify the tax code so that all taxpayers could easily complete their own returns, it would more importantly treat all Americans equally. Only by treating every taxpayer equally can our tax code ever achieve true fairness.
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