THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Monday, January 22, 1996 TAG: 9601190004
SECTION: FRONT PAGE: A6 EDITION: FINAL
TYPE: Another View
SOURCE: By DICK ARMEY
LENGTH: Medium: 91 lines
The typical American family today pays more in taxes than it spends on food, clothing and shelter combined.
Not only is government taking a larger share of family income, but it is doing so through a complex, unfair and often incomprehensible maze of tax laws that allow politicians to micromanage the U.S. economy and bestow loopholes on special-interest groups.
Worse yet, the current tax code discourages saving and investment, which has stifled economic opportunity and has led to stagnant family wages.
The American people have had enough, and they are ready for a change. According to a July 1995 poll, 61 percent of those surveyed think that the current tax system should be significantly overhauled. I agree. That's why I introduced the Freedom and Fairness Restoration Act, legislation that would scrap the current tax code and replace it with a flat 17 percent tax rate on all income.
Under a flat-income-tax system, every dollar of income in the economy would be taxed through either an individual wage tax or a business income tax. Individuals would calculate their income (defined as the sum of wages, salaries and pensions), subtract a generous personal allowance ($33,000 for a family of four) and pay a flat 17 percent tax on the rest.
It's that simple.
Business income would be handled with equal simplicity. Businesses, from the mom-and-pop grocery store to the Fortune 500 company, would subtract expenses from revenues and pay 17 percent on the remainder. All business income, including corporate, partnership, professional, sole proprietorship, farm, rental and royalties, would be taxed.
Since introducing my legislation just 18 months ago, I have received thousands of letters of support. In coffee shops, on the Internet (see http://www.house.gov/armey/), and around kitchen tables across America, people are enthusiastically praising the flat tax for three reasons: It's simple, it's fair and it's pro-growth.
The flat tax is simple. After seven decades of amendments, revisions, exceptions, loopholes, extenders and the occasional overhaul, today's code is a wasteful, complicated mess.
Americans spend 5.4 billion man-hours a year calculating their taxes - more man-hours than it takes to build every car, van and truck produced in the United States. By one estimate, the needless time and paperwork cost our economy a staggering $200 billion a year with the federal tax rules and regulations accounting for $140 billion of the cost.
The flat tax would replace 480 tax forms - and the 280 forms that explain how to fill out the 480 forms - with two postcard-size forms, one for individual wages and one for business income. According to the Tax Foundation, the flat tax would reduce compliance costs by 94 percent, freeing up resources that are currently wasted on record-keeping, filing forms, learning the tax code, litigation, tax avoidance, etc.
The flat tax is pro-growth. Because the flat tax removes the bias against work, saving and investment, it would lead to an investment boom and dramatically higher wages. By lowering marginal tax rates, the flat tax would encourage more work, entrepreneurial effort and risk-taking. And by ending the destructive policy of taxing savings twice - once at the business level and again when it's paid out in the form of dividends - savings would rise and the capital pool would swell.
More capital, along with lower tax rates, means entrepreneurs would have greater incentives to invest in better training, tools and equipment for their workers. Workers would be more productive, resulting in bigger paychecks and higher living standards. In fact, the average American family's income would be about $4,300 higher in 2002 with a flat tax than if we retained the current system.
The flat tax is fair. Under a flat tax, everyone would pay the same flat 17 percent rate. No matter how much you earn, what kind of business you're in or how many lobbyists you have roaming the halls of Congress, you would be taxed at the same rate as every other American.
No longer would politicians decide who is more or less deserving of a tax break. No tax breaks of special loopholes. No schedules. No special deductions or credits. No social engineering or economic tinkering. Just a fair and simple system that treats everyone the same.
The flat tax is more than a plan that's so simple Americans could file their taxes on a postcard. It's a vision of what America can be again; a formula for rejuvenating our economy, freeing entrepreneurial talents and reviving stagnant family wages. It's a common-sense plan for returning to a government that is simple, honest and fair - one that respects the American people's ability to make their own financial decisions.
And who knows? It might just restore people's trust in their government. MEMO: Representative Armey (R), majority leader of the U.S. House of
Representatives, represents the 26th Congressional District of Texas.
by CNB