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The Contract From America—Agenda Item 4

This is the fourth in a series of posts on the Contract From America’s ten-point agenda. Read the first one here, the second here, and the third here.

contract_from_americaThe fourth item in the “Contract From America” (including the level of support it received in a voting process) is:

4. Enact Fundamental Tax Reform

Adopt a simple and fair single-rate tax system by scrapping the internal revenue code and replacing it with one that is no longer than 4,543 words—the length of the original Constitution. (64.90%)

This idea—a flat tax—would replace progressive taxation, in which tax rates rise for people with higher incomes. Should taxpayers fund the government equally? Or should tax policy redistribute wealth?

taxesA flat tax would lift many burdens of filing taxes—the millions of hours that people spend at their kitchen tables filling out forms, the billions of dollars that people pay to tax preparers. It would reduce the need for thousands of bureaucrats in the Internal Revenue Service.

A flat tax would limit the social engineering that Congress tries to do through the tax system—pushing and pulling us with little penalties and credits in the tax code. And it would protect privacy, reducing the amount of information about their personal financial lives that people have to report to the government.

But according to a group called Citizens for Tax Justice, a flat tax would cut taxes for the rich and raise them for everyone else. It’s worth thinking about.

“Tax justice”—that’s an interesting idea. Some might argue that justice is getting to keep what you earn, but the group is clearly oriented toward preserving the progressive taxation system we’ve got.

A number of bills in the current Congress would establish a flat tax, among them:

H.R. 1040, The Freedom Flat Tax Act and S. 963, The Optional One Page Flat Tax Act
These bills would allow taxpayers to opt out of the current tax system and select a single-rate tax of 19% in the first two years and 17% after that. The tax would be charged on income above a standard deduction of $25,580 for joint filers, $16,330 for head of households, and $12,790 for individuals, plus $5,510 for each dependent. (All these numbers would be indexed for inflation.) It’s an irreversible choice—once you selected the flat tax, you couldn’t go back.

S. 741, The Flat Tax Act of 2009
This bill would create a single-rate tax of 20% after standard deductions of $25,000 for joint filers, $18,750 for heads of households, and $12,500 for individuals, plus $6,250 for each dependent. (Also indexed for inflation.) S. 741 would keep a few other deductions around, like the deduction for charitable contributions and home mortgages.

Here are the current votes on these bills. Click to vote, comment, learn more, and edit the wiki articles about these bills.

Visitor Comments for The Contract From America—Agenda Item 4 RSS 2.0

ChuckL

The error in all of these “reforms” is that they have variable exemptions.

Personal taxes should have only one exemption. It should be a multiple of the minimum wage. My multiplier would be 1.5.

This “Flat tax” could also be used for all business taxes with the same rate of taxation by using a percentage of gross profit as the deduction. This should be selected to provide what is considered to be a fair profit by a majority of people and it should have a bottom dollar amount. It is possible that this “fair profit” will actually be above the profit level in some industries. That should not cause it to be reduced.

Proper selection of the “fair profit” would maintain the total business income tax levels at their existing levels.

ChuckL

It should be noted that any “Flat tax is preferable to any Value Added Tax, be that tax called a Value Added Tax or a “Fair Tax”.

In either of the above cases the lower income person is more heavily taxed than any other and No Business Pays any income Tax.

VAT and so-called “Fair Taxes” must be rejected at all costs. They are designed to hide the amount of tax one pays, and to surreptitiously eliminate all business taxes.

J. Guidry, Battlefield, MO.

Chuck, you need to study the “Fair Tax” a bit more. With the “Fair Tax” everyone pays the same percentage of tax upon purchase of goods or services. There is no elimination of business taxes, businesses also pay a percentage when they purchase anything. Spend more, pay more tax. Save more, pay less taxes. Quite simple actually. No IRS involved, no paperwork, no deductions, no credits. Really simple. Might be too simple for some folks to grasp.

ChuckL

J. Guidry. Any tax paid by a business on any purchase is a cost of the purchase and is added to the costs of the eventual product. Therefore no business pays taxes under the so-called “Fair Tax” system. These costs are simply added to the final product price and paid by those who actually earn an income.

J. Guidry, Battlefield, MO.

ChuckL. I invite you to read Chapter 3,The FairTax Book. It deals with the myth of corporate taxes. And, how it would be dealt with under the FairTax.
I am well aware of how the system works now. Anytime I hear a politician scream how they are going to raise coporate taxes or fine some business for whatever reason, I see the price of the product costing the consumer more. Same with the minimum wage hoax, wages go up and prices for goods and services go up. Net loss for the working man. Politicians come out the hero for doing nothing productive. I do understand that no business pays taxes under the current system, the consumer pays them all, one way or another. Read the book, then get back to me, if you wanna.

Kevin Bladsacker

I keep seeing the same thing in every tax plan proposed…Exceptions for every dependent. If my wife and I make x dollars with no children and someone with children makes the same x dollars with deductions, then that’s a redistribution of wealth and I am forced to subsidize their brood. I will not support any tax plan that doesn’t address this primary Socialist concept in our system.

J. Guidry, Battlefield, MO.

The deductions for dependents is a direct encouragement to breed more. Perhaps, a tax should be constructed which does not take into consideration how many dependents a family can produce. I would definitely support it. I have never understood deductions for folks who wanted more children. Want more children, work harder and quit expecting the rest of us to support your brood via punitive taxes.
Kevin, thanks for bringing that to my attention. I guess I was more focused on the tax concepts than the basics.

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