Current Tax System
The current income tax system is very complex. It is so complex; that the IRS publishes 480 tax forms then they publish another 280 forms that explains the 480 forms. “The IRS sends out eight billion pages of forms and instructions each year, which, if laid end to end, would circle the earth 28 times. Nearly 300,000 trees are cut down each year to produce the paper on which IRS forms and instructions are printed” (Armey, Shelby). The main reason the tax code is so complex is the proliferation of deductions, credits and other special preferences in the tax law. Taxpayers with similar incomes can pay vastly different amounts in taxes because of these loopholes. This uneven treatment of taxpayers is fundamentally unfair to those who do not know the loopholes and is at odds with the American value of equality under the law. “According to a study by an economist with the Congressional Research Service, the corporate income tax costs the economy more in lost production than it raises in revenue for the Treasury. Dale Jorgenson, the chairman of the Economics Department at Harvard University, found that each extra dollar the government raises through the current system costs the economy $1.39” (Armey, Shelby).
A typical American family pays more in taxes then they spend on shelter, clothing, food and transportation combined. Taxes now represent a larger share of the U.S. economy than ever before. “The American people are beleaguered by the highest tax burden in American history” (Armey, Shelby). During the last few decades, the tax burden has risen dramatically on families with children. High taxes have implemented unparalleled growth in government. With the exception of Japan and the United States, the U.S. public sector now is larger than the entire economy of any country in the world.
The Flat Tax Solution
The Armey-Shelby flat tax (H.R. 1040) rejects the entire income tax code and replaces it with a flat-rate income tax that treats all Americans equally. The flat rate would not be in full effect until its third year, with a 20 percent rate for the first two years and a 17 percent rate for following years. According to the advocates, this plan would break down the tax code, promote economic opportunity, and reinstate fairness and integrity to the tax system. Individuals and businesses would pay the same rate. The only income not subject to tax would be a generous personal exemption that every American would receive. This plan eliminates all deductions and credits and there are no loopholes. It is just a simple tax system that would supposedly treat everyone equally.
What Is a Flat Tax
“The Armey-Shelby flat tax plan, the Freedom and Fairness Restoration Act, scraps the entire tax code and replaces it with a flat-rate income tax that treats every taxpayer equally. The plan would clarify the tax code, promote job and income growth, and restore fairness and integrity to the tax...