April 16, 2007
Senator Wyden Introduces the Fair Flat Tax Act of 2007
Mr. President, I have come to the floor to talk a bit about taxes. Millions of Americans are scrambling today to file their taxes, trying to pull together their 1040 forms and schedule this'' and form that'' and are plowing through shoe boxes and filing cabinets trying to find the receipts they accumulated all through this year.Millions of our citizens have to calculate their taxes twice to find out the hard way that they have been ensnared in the alternative minimum tax and that they have to pay a much larger burden than they had expected. I believe there is a better way for our country to handle taxes, one where most Americans do not have to fear tax day, do not have to shell out billions of dollars in order to file their taxes, do not have to worry about getting crushed by the alternative minimum tax that years ago, when it was created, was not supposed to clobber middle-class folks in the Pacific Northwest and across the country.Today I am introducing the Fair Flat Tax Act, along with my colleague in the other body, Congressman Rahm Emanuel of Illinois. What we are doing in our fair flat tax legislation is offering the country a proposal that offers the administrative simplicity of a flat tax with the sense of fairness and progressivity that our country has always wanted in our tax system.The tax reform proposal we have developed is simpler because it is easier to understand and use. Our legislation will include a simplified 1040 form, one page, 30 lines for every individual taxpayer. The folks at Money magazine, the financial publication, took this one-page 1040 form, and they were able to fill out their taxe in 15 minutes.We also make the tax system flatter by collapsing the current system of six individual tax brackets down to three brackets of 15, 25 and 35 percent. We create a flat corporate rate of 35 percent. The plan is fairer because we do more to make it possible for middle-class folks to get ahead. We are able to give a tax cut to millions of middle-class families because we eliminate scores and scores of special-interest tax breaks, close those loopholes, that, in effect, drain the country of revenue and never find their way to helping the middle class.We make a radical statement about tax law in our legislation. We say something is out of whack when the cop who is walking the beat in this country pays a lot higher tax rate than the person who makes all their money in the stock market. I wish to make it clear: we want everybody to get ahead, we want everybody to do well, we never want to penalize success. But let's make it possible for all Americans to share the American dream and not just the fortunate few.Under the current Federal Tax Code, all income is not treated fairly. My colleague in the other body, Congressman Emanuel, and I would change that. We are not interested in soaking investors. We believe in markets. We believe in creating wealth. But we want everybody to be able to share in that wealth, and under the Fair Flat Tax, they would be able to do it.The Fair Flat Tax adopts the flat tax idea to provide real relief to the middle class through fewer exclusions, exemptions, deductions deferrals, credits and special rates for certain favored businesses, very often, breaks that have been added to the Tax Code because those powerful interests have lobbyists that the middle-class folks we represent do not.We triple the standard deduction for single filers from $5,000 to $15,000 and from $10,000 to $30,000 for married couples. As a result, the vast majority of Americans would be better off claiming the standard deduction than having to itemize their deductions, so their filing will be simplified. We do keep the key deductions most used by middle-income folks across the country. We keep the deduction for mortgage interest and charity. We keep the credits for children, for education, and earned income.Nobody would have to calculate their taxes twice under the Fair Flat Tax Act. Our proposal eliminates the individual alternative minimum tax which could ensnare as many as 100 million taxpayers by the end of the decade. We eliminate an estimated $20 billion each year in special breaks for special interests.Eliminating those breaks would sustain current benefits for our men and women in uniform, our veterans, our elderly, and our disabled, as well as those tax incentives that promote savings and help our families pay for medical care and for education.I think an especially important feature of the Fair Flat Tax Act is it corrects one of the most glaring inequities in the current tax system; and that is regressive State and local taxes. Under current law, low- and middle-income taxpayers get hit with a double whammy. Compared to wealthier folks, they pay more of their income in State and local taxes. Poor families pay more than 11 percent and middle-income families pay about 10 percent of their income in State and local taxes, while the wealthier pay only about 5 percent.Because many low- and middle-income taxpayers do not itemize, they get no credit on their Federal form for paying State and local taxes. In fact, two-thirds of the Federal tax deduction for State and local taxes goes to those with incomes above $100,000 a year. Under the Fair Flat Tax Act, for the first time, the Federal Code would look at the entire picture of one's taxes, at an individual's combined Federal, State, and local tax burden, and give a credit to low- and middle-income individuals to correct for regressive State and local taxes.Repealing some individual tax credits, deductions, and exclusions from income--along with eliminating some of those special interest favors in the corporate Tax Code--enables larger standard deductions and broader middle-class tax relief. What this means is that, according to the Congressional Research Service, under our legislation, the vast majority of taxpayers would see their taxes go down. The Congressional Research Service has advised us that on average, middle-class families and individuals with wage and salary incomes up to $150,000 would see tax relief. Let me repeat that. We are talking about on average, tax relief for middle-class families and families with wage and salary incomes up to approximately $150,000. Middle-class folks in our country would get a tax break. The legislation also makes concrete progress toward deficit reduction. Certainly, there is a long way to go to stop the hemorrhaging in the Federal budget, but this legislation makes a decent start by allowing us to start lowering the Federal deficit in 2011. It is essentially a revenue-neutral kind of system. But certainly, as we look to the future, this is going to allow us to start lowering the Federal deficit.I also point out, by simplifying the Code, there are going to be other benefits. For example, we have heard a great deal about the tax gap in the Finance and Budget Committees. It is one of the most serious problems our country faces as it relates to finance in America. Upwards of $300 billion of money that is owed to our government is not collected. Given the fact we have a system today where people are able to flout the rules, change the system, why not go to a simpler system that makes it harder for individuals to cheat and easier for the IRS to catch those who do?If you look at what I have proposed, the Fair Flat Tax Act--a 1040 form that is only 30 lines long--it is going to be a lot harder to cheat the system under a proposal such as this, and it is going to be a lot easier for the IRS to catch those who try to take advantage of something such as this.I believe the Fair Flat Tax Act can make a significant contribution in helping this country collect those taxes that are owed and raise a significant amount of revenue from a source that does not increase taxes. What we are proposing with our fair flat tax legislation is a win for everybody except those who would try to rip off the system.I am introducing the Fair Flat Tax Act of 2007 today to provide Americans a plan based on common sense principles that can make the Tax Code work better. We are going to have a system that is simpler and we are going to have a system that is fairer because it closes scores of those special interest loopholes. It gets rid of the despised alternative minimum tax, and it gives everybody a chance to get ahead in America.It is not about class warfare. It is not about pitting one group against another. It is about giving everybody the opportunity to be a winner and to get ahead to provide for their family and ensure that when they are successful, their success can allow them to do well financially.I do think it is important to make sure those who work for a wage get fair treatment. That has not been the case today. I want investors to do well. We all look to the stock market as a major barometer of economic prosperity in our country. But let's make sure everybody has an opportunity to get ahead. Something is seriously wrong when somebody who works for a wage gets hit with a lot higher tax rate than somebody who makes their money as an investor.I hope we can go forward in a bipartisan way on the issue of tax reform. I am extremely disappointed the Bush administration has not chosen to follow up on tax reform. I think it is especially unfortunate, given the fact the President had a commission that had a number of good ideas as it relates to tax reform. I certainly did not agree with all of them, but let me talk about one example of how the Congress could work with the Bush administration in a bipartisan way.I have shown this fair flat tax form I am proposing for a reason; and that is, because I think it is an ideal way for the administration and Democrats and Republicans to work together. My form is 30 lines long--30 lines long--and you can fill it out in under an hour. The President's commission had a form that is maybe six, seven lines longer--just a handful of additional lines. For purposes of Government work, there is virtually no difference between the simplified form I am proposing and what the President's commission has called for. We could get Democrats and Republicans together to work on tax reform and come up with a simplified form in a matter of days.There is very little difference between what I am proposing and what came out of the President's commission. But what is going to be important is that the President reach out to Democrats and Republicans in the Congress and say: Look, I want to work with you on simplifying the Tax Code. I want to work with you to hold down rates for everybody by closing out some of those special interest breaks. I want to see everybody have an opportunity to get ahead.That certainly is what President Reagan did in 1986, when he worked with another tall fellow who served on the Senate Finance Committee, our former colleague Senator Bill Bradley. I went to school on a basketball scholarship. My jump shot is not quite as good as Bill Bradley's, but I sure know the value of bipartisan teamwork.So today, the day before taxes are owed, I want to renew my offer to the Bush administration to work with them on the issue of tax reform. It is a natural for bipartisan leadership. We have a model; and that is, the reform of 1986, where, again, they simplified the system. They cleaned out the clutter. They got rid of some of those special interest loopholes. They held down rates for everybody. It was good for our country. We can do that again.The fair flat tax legislation I am introducing today provides an opportunity for Democrats and Republicans to come together to fix the Tax Code in 2007, the way Democrats and Republicans did back in 1986, when the late President Reagan and Bill Bradley came together and led a bipartisan effort.I think it is time to do that again. Most people clean out their attic every 20 years or so. We ought to clean the Tax Code every 20 years as well. I think we know how to proceed. The question is whether there is political will. I urge the Bush administration to work with Democrats and Republicans in the Congress because the current tax system, which has subjected our citizens to so much hassle and bureaucracy over the last few months, does not have to be that way.There is an alternative. I have presented one. The President's commission has presented one. Democrats and Republicans working together can do better. I urge the President to look to the Congress, leaders of both political parties, to move forward on tax reform in the days ahead.Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.Next Article
