ATR today sent the following letter to Dr. Michael Burgess (R-Texas):
On behalf of Americans for Tax Reform, I am pleased to support H.R. 1040, the “Flat Tax Act.” I would urge all Congressmen who want to see a more pro-growth, simpler, flatter, and fairer income tax to co-sponsor this legislation.
The Flat Tax Act puts into law the original one-rate income tax concept advanced by Stanford economists Robert Hall and Alvin Rabushka. It would completely replace the current personal and corporate income tax structures (as well as the death tax) with a new, voluntary system featuring a flat rate of 17 percent.
The tax base in the Flat Tax Act would be restricted entirely to business profits, wages, retirement plan distributions, and unemployment compensation. This is a rough proxy for a consumed income base, which excludes the return on savings from income taxation and allows for a full deduction for all business inputs. Only in this way can a key tax reform principle be achieved: taxing all income once and only once.
A key advantage of your version of the flat tax idea is that each taxpayer gets to choose for himself whether to stay in the current system or move over to the flat tax system. Families and business owners who have built their lives around the current system’s maze of exclusions, adjustments, deductions, and credits can stay in the current system if they want to. Most Americans will gladly migrate over to the far easier flat tax system.
The Flat Tax Act provides for a generous family deduction to ensure that the new system is steeply progressive and exempts families at or near poverty from income taxation. Under the bill, a family of four would face no income taxation on its first $46,100 (plus inflation) of taxable earnings. This is nearly twice the federal poverty level for a family this size. No American family is taxed below about 150% of the federal poverty level.
Finally, the Flat Tax Act creates a two-thirds Congressional supermajority requirement to raise the tax rate or limit the standard deduction. This is a wise and necessary protection for taxpayers.
As Congress considers fundamental tax reform legislation this year, it would do well to start from the wise policy contained in H.R. 1040, the “Flat Tax Act.”