The Freedom Flat Tax Act

# The Freedom Flat Tax Act will allow every American the freedom to choose if and when they want to opt into the flat tax system. This system will be fairer and simpler, as well as promote economic prosperity. There are two components to the flat tax: the individual wage tax and the business tax. 

**Individual Wage Tax**

-   The individual tax rate is 19%, but will decline to 17% after the
    initial two years of participating in the flat tax system.

-   It will have no deductions, but will allow for the following
    personal exemptions:

    -   \$24,600 for a married couple filing jointly;

    -   \$15,700 for a single head of household;

    -   \$12,300 for a single person; and,

    -   \$5,300 for each dependent.

-   For example, a family of four would not be subject to the flat tax
    until their combined income reached \$35,400, which is 194% above
    the 2002 federal poverty level of \$18,244.

## 

## Business Tax

-   The business tax rate is 19%, but will decline to 17% after the
    initial two years of participating in the flat tax system.

-   The corporate taxable income base would consist of the costs of
    taxed inputs subtracted from sales, and only employee wages and
    pensions would be tax deductible.

-   The flat tax would allow immediate expensing of all capital
    expenditures, thereby encouraging corporate capital investment and
    increased economic growth.

# 

# Additional Features

-   **Optional** -- Unlike previously introduced versions of the flat
    tax bill, this bill will allow individuals and businesses to choose
    if and when they will opt into the system.

-   **Permanent** - The decision to opt into the flat tax system will be
    permanent for two reasons:

# To prevent possible tax evasion resulting from taxpayers jumping back and forth from the current income-based system to the flat tax system.

1.  To allow eventual transition to an entirely consumption-based tax
    system. Once the majority of Americans have opted into the flat tax
    system, Congress will determine the best way to complete the
    transition between the old income-based tax and the new flat tax.

-   **Innocent Spouse Provision** - Will extend the Taxpayer Bill of
    Rights to flat tax electors by allowing revocation of permanent
    election in the following case:

# 1. When an individual's spouse files a fraudulent joint tax return, understating the amount of taxes owed, without the "innocent spouse's" knowledge; and

> 2\. When taking into account all the facts and circumstances, it would
> be
>
> inequitable\* to hold that "innocent spouse" liable for the unpaid
> tax. \*(As defined by the *IRS Indications of Unfairness for Innocent
> Spouse Relief)*

# 

# WHY THE FLAT TAX?

-   The Tax Foundation estimates that a flat tax would reduce compliance
    costs by 94 percent, saving taxpayers more than \$100 billion in
    compliance costs each year.

-   The Freedom Flat Tax would catalyze the transition to a system that
    will eliminate all of the high compliance costs by eliminating the
    complexity of the tax code and drastically reducing the amount of
    paperwork necessary for compliance.

-   In addition, the flat tax system would be fairer and result in a
    more prosperous economy.

# The Flat Tax Would Be Fairer

-   The flat tax will restore fairness to the tax code by treating
    everyone the same. No matter how much money you make, what kind of
    business you\'re in, or whether or not you are married, you will be
    taxed at the same low rate as every other taxpayer.

-   The current system is riddled with disincentives for economic growth
    and chock full of special preferences. Congress has the obligation
    to remove those obstacles to American economic growth and health.

-   If all Americans are equally protected by the law, they should be
    equally protected from the law and taxed accordingly.

# The Flat Tax Will Promote Economic Prosperity

-   The goal of the flat tax is to create a tax system that minimizes
    the number of market-distorting investment decisions that are made
    as a result of that tax system; people will base their financial
    decisions on common-sense economics, not the tax code.

-   When saving is no longer taxed twice, people will save and invest
    more, leading to higher productivity and greater take-home pay. The
    flat tax will spur economic growth by eliminating the current tax
    code's bias against savings and investment.

# 

# Because the flat tax treats all economic activity equally, it will promote greater economic efficiency and increased prosperity.