Saving Time & Money: An optional flat tax

National Review
April 14, 2008
By Michael Burgess & Newt Gingrich

Nothing is certain except death and taxes, and physicians will tell you that death is much less complicated than the American tax code.

The complexity of today’s tax code is a consequence of countless deductions and exemptions aimed at promoting a variety of congressionally determined policy agendas. The result is federal law loaded with opportunities for avoiding taxes and exploiting loopholes at the expense of fellow Americans. Behind every loophole there is a lobbyist.

Everyone is familiar with the problems inherent in our convoluted tax code. Criticizing it is as American as apple pie and baseball. And for good reason. Each year Americans spend billions of hours and billions of dollars complying with the complex code. We also spend countless more hours complaining about it.

Time is precious, and often we don’t have enough time for personal priorities like raising our families, cooking dinner, or even spending time with friends. Then there is the dollars-and-cents side of the equation, where time is money and resources are spent navigating tax law instead of spent growing the economy and creating jobs.

Taken together, this argues for a strong prescription of real change: Reform the tax code.

When President Reagan cut taxes in 1981, several good things happened. The economy grew, revenues increased, and jobs were created.

It’s hard to think of better medicine for our ailing economy than replicating successful reform of the tax code on an even greater scale.

How do we do it? Flatten tax rates; simplify the code; and, shift the burden away from our families and small businesses. The encouraging news is we have a practical and effective blueprint for delivering this real change across-the-board. It’s called the optional flat tax plan, or the “one page, one rate” tax plan.

In 1981, Robert Hall and Alvin Rabushka proposed a boldly simple tax structure that would transform the Internal Revenue Service and our economy by creating a single rate of taxation for all Americans.

Today, several states have implemented this single rate structure, and from Utah to Massachusetts, citizens are seeing the benefits.

In Colorado, a single income-tax rate generated so much surplus revenue that one lawmaker actually proposed reducing the rate ten years after its implementation, and today the rate is below its original level. In Indiana, the economy boomed after a single rate went into effect in 2003. Since that time, corporate income tax receipts have increased by almost 250 percent. Admiring such success, Governor Mark Sanford of South Carolina currently is pushing for an optional flat tax on Palmetto State income.

In Congress, members like Michael Burgess of Texas, David Dreier of California, and Paul Ryan of Wisconsin are working to establish an optional tax structure for the United States that is flatter and simpler. Senators Arlen Specter and Sam Brownback support similar measures on the other side of the Capitol.

A faster, flatter, fairer tax structure would be simple: tax returns would be done on a single page, perhaps even on a postcard. Subtract from your income a standard deduction, multiply the result by a fixed single rate of taxation, and the process is over. Gone will be the stressful hours spent figuring out whether your military service or marital status will adversely affect your return. No more headaches trying to determine where estimated tax payments go. Tax preparation fees might be money spent on something more rewarding.

Secondly, a new deduction, which would be above the established poverty level, means an optional flat tax would not unfairly target the poor. Approximately the lowest 42 percent of income earners would potentially be exempt from paying taxes altogether, and any taxes they did pay would only be on the amount that exceeded the deduction.

An optional flat tax would also eliminate the Alternative Minimum Tax. And if a person had twice as much income as another, he or she would be taxed twice as much. Furthermore, a single rate tax structure would eliminate taxes on savings, capital gains, and dividends. Saving would increase and businesses would expand to create new jobs. By reducing dramatically the world’s second-highest corporate income tax rate means that U.S. companies would have less incentive to move their jobs abroad. And here is where the all-American principle of freedom comes into the prescription: opting for a one rate, one page tax plan would be entirely left up to the individual or business to decide, not Uncle Sam.

An optional flat tax would save taxpayers more than $100 billion per year and reduce compliance costs by over 90 percent. This is a stimulus package that would have an immediate effect on our American economy.

Recent polling by American Solutions shows that over 80 percent of Americans favor the option of filing taxes on a one page tax return with one rate. After all, who would complain about making something easier, less costly, and less time consuming?

This is a political year, with elections right around the corner. You can’t help but hear talk about change. Let’s consider how the right change could improve the most complicated of institutions (the IRS), save time, money, and some peace of mind for the taxpayer, and most importantly, deliver enduring prosperity for all Americans. An optional flat tax is a plan for real change worthy of everyone’s vote. It’s also a plan that will finally make taxes less complicated than death.

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By Anonymous @ Thursday, April 24, 2008 2:48 PM

I am supportive of both the flat tax and fair tax. I would prefer the fair tax because it would provide more transparency in government spending. However, I think passing the flat tax is more feasible. Both of the tax reform ideas would help cut down on the cost of compliancy, which is eating away at our countries productivity.

By @ Thursday, April 24, 2008 10:30 AM

This does it! Nancy Pelosi Global Warming Treaty, and now, let's IGNORE THE OBVIOUS ANSWER.
THE FAIR TAX! Any sane person who has investigated the Fair Tax can plainly see it IS THE ANSWER. It is by no means perfect, but in comparison to what we have now, it was Drafted in Heaven.
It will help Business. It will, for the most part, get rid of the IRS. It will collect monies from the "underground."
Ah, but we have one big strike against it. The Elite in DC will LOSE POWER. Yes. Nothing strikes fear in those Muckamucks in Washington quite like the Loss Of Power. The IRS is the Governments private GESTAPO. All powerful. They can seize your property, garnish your wages and with little effort, completely and utterly destroy everything you have worked for all your life, in one fell swoop.
Newt. Why can't you go along with the obvious? I hope it is not petty jealousy. If you have objections to the Fair Tax.. please explain.

By 2ig @ Sunday, April 20, 2008 6:42 PM

I have always seen "Income" as the wrong tax base. Income is what we produce for others while "Consumption" is what others do for us. Surely we should base our taxes on what we take from society not the proceeds of our work and investment, that benefit our country. The tax base is more easily determined as "Cash receipts" less what you have left at the end of the year, in cash or savings. Surely it is better for one to say "why spent more if it just attracts more tax", than to say "why should I earn more if it just attracts more tax". I believe in a graduated "Cash flow" tax, surely one must recognize that of a higher standard of living is because of the society in which they live, and a graduated rate recognizes that. Surely also one must recognize that the savings, both small and large, of all people should be rewarded through not being taxed until spent. The wealth of a nation is the combined wealth of all its people.

By Shepardh1 @ Sunday, April 20, 2008 11:22 AM

Let's take a step back... we are discussing an evil concent here. The taking of the property of another by means of force or fear (taxing) is wrong. If a robber stands in an alley and steals $50 from some people and $20 form others... are we saying that the robber should take an even 30% of whatever his victims have in their pockets?

Income tax is wrong. Changing the amount or manner in which it is collected is not the solution.

The solution is a 20-year push to reduce the size and scope of government by at least 50%... then we can lower taxes. The government needs to stop regulating things that people put in their brains (education), things that people eat (FDA) things that people snort, smoke or inject (DEA) things that people grow (Dept Ag) etc... when government returns to its proper role, then we can worry ourselves with taxes.

By Francan @ Friday, April 18, 2008 4:53 PM

There is a better way to tax reform than the Flat Tax based on income! It is called the FAIR TAX H.R. 25 and is submitted by John Linder. I sure would encourage Newt to talk with Mr. Linder, Mr. Boortz and Mr. Hannity and get behind the Fair Tax instead of a simple flat tax that not everyone will have to pay because not everyone has an income. But, everbody will purchase merchandise.

By MexRick @ Wednesday, April 16, 2008 5:39 PM

I have also long favored a flat tax and feel it is a viable way to streamline the taxation process, minimize fraud, and increase spendable income. Contrary to most flat tax proposals, I urge people to consider a flat CONSUMPTION tax. It is truly a flat tax and would resolve two major problems inherent in a tax based on "reportable" income. In a vast majority of cases, what a person "reports" is not their actual income. In some cases there is a substantial difference.

The underground economy in the United States is flourishing. A flat tax base on consumption would resolve that problem. Think about it. Does a drug dealer report his income? Obviously not but he buys nice cars, fancy clothes and jewelry, etc. A consumption tax would force him to pay his fair share of taxes.

OK. Exempt a primary personal residence (only one) from the tax and, maybe one or two other things which persons far more intelligent that I am can identify, but the vast majority of everything we purchase would be taxed.

Taxing at every level would also reduce the tax rate required. If a product had, for example, five levels in its manufacturing process, then the government would receive five levels of taxes instead of just one. More tax revenue directly relates to a lower tax rate.

There are just too many "loopholes" in a tax structure based on reportable income. A consumption tax closes those doors.

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