There is an emerging consensus that America needs real tax Reform. Ways and Means Chairman Bill Archer and Congressman Billy Tauzin have called for abolishing the 16th Amendment, ending the income tax and establishing a retail sales tax in its place. Majority Leader Dick Armey of Texas and Steve Forbes have called for a flat rate income tax to replace the present system.
Whether we move to a flat tax or retail sales tax, there three key principles taxpayers must insist on for real tax reform.
Income Should Be Taxed Only Once
Today we pay taxes when we earn our paychecks, when we save, when we invest, when we buy products and services and when we are foolish enough to die, the government wants half of what is left. Real tax reform taxes income only once. The flat rate income tax would tax income only once and then leave us alone. Speaker Newt Gingrich has called for the elimination of the capital gains tax and the death tax-both these taxes simply tax money that has already been taxed before.
Income Should be Taxed at One Single Rate
Both the flat rate income tax and the retail sales tax tax income at one rate. This is important for two reasons. First, it is only equitable that everyone pay the same rate. No one should be punished by being taxed at a higher rate because they work hard, take a second job or work overtime or on Saturdays. All income should be treated equally. Second, if everyone pays the same rate, it keeps the politicians from playing their favorite tax game: divide and conquer. We remember when Bill Clinton said he was only going to raise taxes on the wealthiest two percent of Americans. He told the rest of us to pay no attention. When he was done mugging that two percent-mostly small businessmen and women-Clinton then mugged social security recipients, people who drive cars and he and Al Gore tried to tax your heating fuel.
If everyone is taxed at the same rate, the politicians must face a united taxpayer front when they want to raise taxes. My home state of Massachusetts has a flat rate income tax mandated by the state constitution. Five times the liberal big government forces have put a measure on the ballot to allow a graduated or progressive income tax structure. Five times "liberal", "McGovern" "Ted Kennedy" "Taxachusetts" Massachusetts voted down any effort to move away from a flat tax. So when people ask if a flat tax is politically possible, the answer is that even in Massachusetts you cannot get taxpayers to move away from a flat tax. It is very popular.
There Must be a Constitutional Amendment Requiring a Two-Thirds Supermajority Vote For Any New Tax or Tax Hike
A constitutional amendment requiring a supermajority of two-thirds to raise taxes will protect taxpayers from tax hikes. Today there are 14 states that require a supermajority to raise taxes. This is a very helpful protection. Not perfect, but much better than allowing a simple majority of 51 percent to raise taxes. House Speaker Newt Gingrich and Senator Trent Lott have promised a vote on this constitutional amendment each April 15. Congressman Joe Barton of Texas and Senator Jon Kyl of Arizona sponsor the House and Senate versions of this constitutional amendment. Any tax reform that doesn’t have this constitutional protection against taxes creeping back up or old taxes coming back from the dead is dangerous.