# Presentation: 202509

## Tax System ProblemsandFlat Tax Solutions

- Presented by:
- Dick Armey
- Co-Chairman, FreedomWorks
- To The President’s Commission on Tax Reform

## The Tax System is Broken

- “The American people deserve—and our economic future demands—a simpler, fairer, pro-growth system.”
- President George W. Bush, Republican National Convention, 2004
- This is what the American people want

## The Tax System is Broken

- The American People know the system:
- Is too complex
- Is unfair
- Hinders economic opportunity, savings, investment, and job creation
- Undermines good government

## How to Fix the Tax System	

- There is considerable agreement that the current system needs to be scrapped for one that is simpler, fairer, and pro-growth
- Less agreement on what it should be replaced with
- Flat Tax best addresses these concerns
- National sales tax should not be introduced unless 16th Amendment is repealed, otherwise we could have European-level taxation with both income tax and sales tax

## What a Flat Tax Would Look Like

- Liberating in its simplicity
- Starts with scrapping current code
- All income—business and individual—would be taxed only once and at one rate
- Only exemption: personal exemption so every family can cover their expenses before paying the government

## What a Flat Tax Would Look Like

- All deductions and credits eliminated
- No breaks for special interests
- No loopholes for powerful lobbies
- No favoritism towards some citizens and harassment of others
- No tax breaks for corporations
- No tax shelters
- No depreciation schedules
- No tables
- All Americans treated equally

## Flat Tax Solves Current Tax Code Problems

- Current Problem: Complexity
- 8 billion pages of forms from IRS yearly
- Compliance time:    6.6 billion hours
- More than spent building every motor vehicle in the country
- Compliance costs: $194 billion annually
- Over 26 hours to complete 1040

- Flat Tax Solution: Simplicity
- One post card per taxpayer
- Income – personal exemption x rate = tax liability
- That’s it

## Flat Tax Solves Current Tax Code Problems

- Current Problem: Unfair
- All Americans not treated equally
- Taxpayers with similar incomes can pay vastly different amounts

- Flat Tax Solution: Fairness
- All Americans treated equally
- Still progressive

## Flat Tax Solves Current Tax Code Problems

- Current Problem: Hinders Economy
- Punishes savings, work, and entrepreneurship
- Reduces investment
- Distorts financial decisions
- Jorgenson: $1 raised costs economy $1.39

- Flat Tax Solution: Prosperity
- All economic activity treated equally, promoting economic efficiency, increasing prosperity
- Savings not discouraged, increasing productivity

## Flat Tax Solves Current Tax Code Problems

- Current Problem: Undermines Good Governance
- Lobby industry is DC’s biggest private sector employer
- Since 1998 alone:  483 companies have lobbied the IRS with 2,884 tax lobbyists

- Flat Tax Solution: Transparency
- No special interest deductions for which to lobby
- See chart

## More tax code, More lobbyists

## Common Concerns

- Mortgage Deduction
- Flat tax would lower interest rate by more than loss of deduction
-  Increase deficit?
- No, can be revenue neutral
- Progressivity?
- Flat and still progressive
- Index family allowance?
- Yes

## Common Concerns

- Will charities suffer?
- No, charitable donations track income, not tax benefits

## Flat Tax Solves Current Tax Code Problems

- It’s simple
- (Income – Personal Deduction) x Rate = Tax
- It’s fair
- Popular with Americans because it embraces core American belief: That we should all be treated equally
- It’s pro-growth
- Ends distortions by treating all economic activity equally
- It’s the right thing to do