The tax code, last reformed in 1986, has grown into a 1.4 million-word, 10,000-section behemoth that takes the average taxpayer 31 hours to navigate each year. In the 21 years since Congress passed the Tax Reform Act of 1986, there have been approximately 15,000 changes made to the tax code. That works out to roughly three changes for every working day of Congress. The six billion hours each year that Americans are estimated to spend doing their taxes is greater than the combined annual working hours of every American employed in the manufacturing of cars, computers, airplanes and steel in the United States. The problem has grown so dire that the public now shells out more on tax preparation than our government does on higher education. Clearly something is wrong and it’s time for a change.
That is why Rep. Emanuel (D-Ill.) and I wrote the Fair Flat Tax Act, which we introduced on Monday. Under our bill every individual would use a dramatically shortened, one-page, thirty-line 1040 form that would take less than an hour for most Americans to complete. The bill would also provide major tax relief for America’s middle class, and would do so while remaining revenue neutral and helping to pay down our growing national deficit.
The details of our plan are as follows. First, it would make the tax code simpler and flatter. It would do so for individuals by shrinking the current six brackets down to three: 15 percent, 25 percent and 35 percent. The bill would also triple the standard deduction to $15,000 for individuals and $30,000 for families. This would provide needed tax relief to most Americans, and would save them countless hours of searching for receipts, invoices and credit card statements every April since they would no longer have to itemize.
The legislation also brings fairness back into the tax code. It does so by eliminating the preference for capital gains and dividends over wage and salary income. Under the current system, a cop working the beat has to pay a higher rate on his income than someone who makes millions from selling stock does. Our plan also provides much-needed relief from the individual Alternative Minimum Tax for millions of middle-class Americans. In addition, many of the individual credits, deductions and exclusions that benefit middle- and lower-income Americans, including those for mortgage interest, charitable contributions, teacher classroom expenses and credits for children and earned income, would remain intact under our plan. The result of all of this is a fairer tax code that will give all Americans the chance to get ahead.
As for the corporations, there would be a single flat tax rate of 35 percent. The bill would end a number of corporate tax loopholes and specialized tax breaks that favor business in one sector over another.
There is little doubt why the American public is so anxious for tax reform. What Rep. Emanuel and I have proposed would address their concerns by creating a tax code that is simpler, flatter and fairer.