Posted on 08/10/2012 12:43:51 PM PDT by SeekAndFind
Republicans have promised to finally overhaul Americas tax code next year. Reform is long overdue. Now its a matter of what direction lawmakers should take.
While some of the GOPs pragmatists have already balked at being bold, now is exactly the time to take that message to the American people. Theyre looking for solutions, not excuses. And theres one plan that stands out: the New Flat Tax. It features one rate, two credits, three deductions. It’s that simple.
The plan is part of The Heritage Foundations comprehensive solution for fixing Americas debt problem and restoring prosperity. As a Heritage employee, Im naturally biased. But my personal preference for the flat tax predates my tenure at the think tank. It was 16 years ago, as Steve Forbes pursued the presidency, when the flat tax first appeared on many peoples radar, including my own.
There are few chances to fundamentally transform policy in Washington. The last major tax reform came in 1986 under President Ronald Reagan. So if Republicans are serious about tackling the tax code, they need to start preparing Americans now. (Lest we forget about the botched attempt at Social Security reform in 2005.)
Before we get into the details of the New Flat Tax, its important to first understand why tax reform is necessary. Heritages J.D. Foster explains:
Americas federal tax code is complicated beyond imagining. The arrival of personal computers and tax software has permitted the creativity of policymakers in Washington to run amok, creating tax complexities far beyond what even tax professionals could manage unaided by electronics. There are a multitude of credits, exemptions, and deductions, many of which are subject to special rules and phase out over different levels of income. As if this was not bad enough, there is a parallel tax called the Alternative Minimum Tax, and yet another in the payroll tax that funds Social Security and part of Medicare. And, all of this complexity imposed on individual taxpayers is relatively minor compared to the tortuous rules and exceptions businesses great and small must suffer.
That complexity is something almost all lawmakers will acknowledge. Last week, as the House voted on a plan to make tax reform a priority in 2013, differences began to emerge about how to fix the broken system.
If you were to distill down the single adjective that was to describe what members are looking for in tax reform, it would be bold, Rep. Peter Roskam (R-IL) told Bloomberg Businessweek.
Yet the same story revealed that Republicans are already ruling out bold ideas. The GOPs set of tax-reform principles would apparently make it impossible to implement a flat tax. Some of those principles include reducing the number of individual tax brackets from six to two, lowering the top rate of 35 percent to 25 percent and abolishing the problematic alternative minimum tax.
By contrast, the New Fair Tax creates a single rate that ensures individuals are taxed only once on their income. That rate, around 28 percent, applies to wages and salaries. Remember, the New Flat Tax abolishes payroll taxes, so this rate is much lower than the combined income and payroll tax rate the middle class pays today. And the rate would decline over time so the new tax code never raises more than the current code has raised on average historically. Importantly, savings would be taxed only when spent, encouraging more Americans to save money now rather than rely on the government later in life.
Simplicity is the selling point for a flat tax, and this plan honors that principle. There are just two credits: a $3,500 health insurance tax credit for low-income and middle-income families as well as the current Earned Income Credit.
The plan has three deductions: one that lets taxpayers deduct expenses for higher education, another that preserves deductions for charitable contributions, and a third that makes the home mortgage interest deduction optional.
Think for a moment what this truly means. No longer would your paycheck have separate line items for Medicare and Social Security. And the money you save is not taxed until you spend it.
Theres more detail in Fosters paper, but heres the whole plan explained in under two minutes:
Lawmakers will have a choice next year on tax reform. If they want to go bold and set America on a path to prosperity, theyll make substantive changes like the New Flat Tax.
Rob Bluey directs the Center for Media and Public Policy, an investigative journalism operation at The Heritage Foundation. Follow him on Twitter: @RobertBluey
Where is Romney on Fair Tax / Flat Tax ?
I don’t think it is fair, just because I ride a bike, that they want to tax the flats I get. Next they will tax the Flat Repair Kit I use to fix the flat... what? It’s not about flat tires? Never mind.
There is a simpler solution.
Simply find the Tax Code Laws from 1952 and reinstate them in their entirety...........kinda like a re-boot............
In 1952, income over $200,000 per year was taxed at a rate of 92%. Are you sure you want to reinstate that?
Adjust for inflation, but preserve all the loopholes.............
Simplify the tax code? And take away the power of the politicians?
It’s talked about EVERY election and nothing EVER changes. EVER. The only way it will ever change is a major tax revolt where millions of us decide we aren’t going to file and we aren’t going to send the bastards any more of our money!
Period. End of story.
Never going to happen.
From the politicians’ point-of-view, that complexity, lack of transparency, and the ease with which special giveaways can be inserted into the byzantine mess, are features, not bugs.
Conservative anti-socialists all and solidly rooted in the rewarding of personal merit and the ostracizing of shiftlessness blah blah woof woof...
...but how many of these honorable men are as steadfast in their ideology against the most ubiquitous Leftist injustice of all aka the progressive tax system?
Some say it's a losing battle because in order to pay the government bills all will have an equal investment under the flat tax and that means more will have to pay as a percentage of their income than others and that they will greatly outnumber those others and will predictably vote for selfish reasons—that is the realpolitik the Left and GOP-e live by.
So establishing a flat tax would be the ultimate in economic justice and adherence to conservative principle...
...to dream the impossible dream...
Any system that retains the word “income” is a no go! Who gets to define that single little word?
Let’s forget about taxes on “income” and go to a system like our founders favored. Tax articles of consumption once and only once at the point of retail sale and be done with it.
Let’s insist upon the FAIRTAX so we can once again be FREE men!
Take the cost of operating the Federal government for a year, divide by the number of people over the age 18 to get a per-person amount, and send everyone their bill.
YES!!!!
Any tax on income is slavery.
Taxes ain't a car payment where they take your car for nonpayment...they can take your freedom.
But then at least the roads will be clean and the potholes repaired;)
Flat Tax, Fair Tax, whatever... none make any sense or are “fair” in any way, unless EVERYONE has ownership by paying SOMETHING in. Is it fair that someone making $XX,XXX a year not only pays nothing in, but receives a “refund” check every year, while someone who makes $XX,XXX+1 may actually PAY?
What about the IRS actually checking who they are sending refunds to? Recent reports show that $Billions were sent in illegal and/or fraudulent “refunds” to illegals and legal immigrants who didn’t have a refund due...
Or how about that supposed “miracle” software that crashed the IRS computer system and threw many people’s returns/refunds way behind schedule (interest free loan to Uncle Sam???). That software was suppose to PREVENT tax fraud, with a special emphasis on ID theft. Low and behold - the numbers of such fraudulent returns (in which huge sums of $$$ were paid out) skyrocketed this year. I had a family member affected by this -
A. Get rid of the 75% of the Federal government devoted to buying votes, and it won’t be such an enormous bill.
B. They need to look for a job.
ping to read later
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