(1) the current Tax Code is irreparably flawed 
and must be replaced; 
(2) to enhance the liberty and protect the pri-
vacy of individuals, the Tax Code must be made sim-
pler and nonintrusive, and it must be applied 
evenhandedly to all; 
(3) to be fair and to provide for the prosperity 
of current and future generation, the Tax Code must 
give all individuals at all income levels an oppor-
tunity to save, invest and raise their standard of liv-
ing and that of their children; and 
(4) future economic growth requires a tax sys-
tem that facilitates successful competition in the 
global marketplace. 
(b) MAIN FEATURES OF SIMPLIFIED USA TAX SYS-
TEM.— 
(1) REPLACEMENT
OF
OLD
TAX
SYSTEM.— 
Chapter 1 of subtitle A (related to income taxes) of 
the Code is repealed and replaced for years begin-
ning after 2006. 
(2) Estate and gift tax repealed. 
(3) NEW TAX SYSTEM.—The Simplified USA 
Tax consists of— 
(A) a simplified tax collected from individ-
uals, that for years after 2007 replaces the in-
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come tax imposed on individuals by section 1 of 
the Code, and 
(B) a simplified tax collected from corpora-
tions and other businesses, that for years after 
2007 replaces the income tax imposed on cor-
porations by section 11 of the Code. 
(4) SIMPLIFIED USA TAX ON GROSS PROFITS.— 
Corporations and other businesses pay tax on their 
annual gross profits from business conducted in the 
United States, except that— 
(A) export revenues are excluded, and 
(B) imports are taxed. 
(5) SIMPLIFIED USA TAX ON INCOME.—Individ-
uals pay tax on their annual income from wages, 
dividends, interest, and other financial income (in-
cluding sales of property), except that— 
(A) investment earnings on previously 
taxed income that is placed in a Roth IRA is 
exempt from further taxation, 
(B) a portion of each family’s income is ex-
empt from tax, and 
(C) deductions are allowed for— 
(i) education costs, 
(ii) religious, charitable, and other 
philanthropic donations, 
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(iii) home mortgage interest pay-
ments, and 
(iv) contributions to qualified IRAs. 
(6) CREDIT FOR FICA PAYROLL TAXES PAID.— 
The amount of tax due is reduced by the payroll tax 
that is— 
(A) in the case of an employee, withheld 
from wages, or 
(B) in the case of a corporation or other 
business, paid by the employer. 
(c) CONCEPTS AND STRUCTURE OF NEW TAX SYS-
TEM.— 
(1) GUIDING PRINCIPLES OF THE SIMPLIFIED 
USA
TAX
SYSTEM.—The Simplified USA Tax is 
based on the following principles: 
(A) National wealth and well-being depend 
on the work, skill, and savings and investment 
of people. 
(B) Businesses are people and their capital 
working together. 
(C) Capital makes people more productive. 
(D) Everyone benefits from a growing 
stock of national savings which in turn allows 
for a growing stock of physical and human cap-
ital. 
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(E) Under the Simplified USA Tax, the 
deferral of taxation on investments in human 
capital represents an investment by the Federal 
government in the nation’s capital stock and 
the Federal government shares in the return on 
its investment in the form of higher economic 
output and revenues in the future. 
(2) SINGLE TAX IN 2 PARTS.—The Simplified 
USA Tax is composed of a business tax and an indi-
vidual tax which are 2 parts of a single tax system 
that subjects all income produced and received to 
taxation once and only once. The 2 parts are as fol-
lows: 
(A) BUSINESS TAX AT THE SOURCE OF IN-
COME.—Tax is paid by corporations and other 
businesses which produce and sell goods and 
services that are— 
(i) the source of nearly all the gross 
domestic product of the United States, and 
(ii) the ultimate source of income re-
ceived by individuals. 
(B) INDIVIDUAL
TAX
ON
INCOME
RE-
CEIVED.—Tax is paid by individuals when they 
receive wages and salaries as compensation for 
gross domestic product created by their work. 
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(3) SAVING AND INVESTMENT.—The Simplified 
USA Tax allows people to save and businesses to in-
vest as follows: 
(A) FAIR OPPORTUNITY FOR PEOPLE TO 
SAVE.— 
(i) OPTIONAL ELIMINATION OF DOU-
BLE TAXATION.—When an individual earns 
income and is taxed on that income, the 
individual can save that income in a Roth 
IRA and not pay income taxes on the in-
vestment earnings. 
(ii) DEDUCTIBLE
AND
EXCLUDABLE 
SAVINGS.—The Simplified USA Tax con-
tinues provisions of present law that 
allow— 
(I) lower income individuals and 
certain others to make deductible con-
tributions to individual retirement ac-
counts, and 
(II) encourage employer spon-
sored savings and retirement plans 
that defer taxation of income through 
use of 401(k) plans and other quali-
fied retirement plans. 
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(B) FAIR OPPORTUNITY FOR BUSINESSES 
TO INVEST.— 
(i) NO PREPAYMENT OF TAX.—When 
a business invests in plant and equip-
ment— 
(I) a deduction is allowed for the 
cost, and 
(II) tax is deferred. 
(ii) TAX ON EARNINGS AND RECOVERY 
OF COST.—When recovered out of business 
revenues, both the cost of the investment 
and the earnings on the investment are in-
cluded in gross profit subject to tax. 
(iii) EXPENSING.—The deduction for 
investment is the equivalent of allowing the 
cost of plant and equipment to be expensed 
instead of depreciated. 
(4) FAIR OPPORTUNITY TO COMPETE IN THE 
GLOBAL MARKETPLACE.—The Simplified USA Tax 
serves the strategic interests of the United States in 
international markets as follows: 
(A) BORDER ADJUSTABLE TAX.— 
(i) 
AMERICAN-MADE
EXPORTS.— 
Goods and services produced in the United 
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States can be sold into world markets free 
of tax. 
(ii) FOREIGN-MADE IMPORTS.—Goods 
and services imported into the United 
States bear a fair and proportionate share 
of the tax burden in the United States. 
(iii) LEVELING THE INTERNATIONAL 
PLAYING FIELD.—Border adjustments for 
exports and imports are consistent with 
international standards and practice. 
(5) A SIMPLE AND UNDERSTANDABLE TAX.— 
The Simplified USA Tax for individuals— 
(A) is written in a simple, understandable 
form, 
(B) contains only a few exemptions, deduc-
tions, and credits, and can be reported on a tax 
return only a small fraction the size of Form 
1040. 
(6) A NONINTRUSIVE, EVENHANDED TAX.— 
(A) TAXPAYERS ARE IN CONTROL.—When 
the rules are few and clear, taxpayers can cal-
culate their own tax correctly and file their own 
returns without fear of mistake or of getting 
caught up in an argument with the IRS. 
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(B) LIMITED ROLE FOR IRS.—When the 
rules are few and clear, the IRS does not have 
the broad interpretive power that puts tax-
payers at risk of being treated unfairly and un-
evenly. 
(C) 
RESTORING
VOLUNTARY
COMPLI-
ANCE.—When the rules are few and clear, the 
IRS can concentrate on helping taxpayers vol-
untarily pay their correct share of tax revenues 
for public use and benefit under a tax system 
that is understood and respected. 
(7) MAINTAINING TAX PROGRESSIVITY FOR IN-
DIVIDUALS.— 
(A) GRADUATED TAX.—Like the tax im-
posed by section 1 of the current Code, the 
Simplified USA Tax for individuals is a grad-
uated tax. 
(B) FAMILY
AND
WORK
CREDITS.—The 
Simplified USA Tax recognizes that every fam-
ily’s budget includes necessities. The Simplified 
USA Tax provides a family credit for all fami-
lies as well as a refundable work credit, quali-
fying families to maintain a basic standard of 
living. 
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(8) BUSINESSES AND INDIVIDUAL SHARE THE 
TAX BURDEN.— 
(A) BUSINESS
PORTION
OF
TAX
BUR-
DEN.—Corporations and other businesses pay 
about the same portion of the total tax as 
under the current Code. 
(B) INDIVIDUAL
PORTION
OF
TAX
BUR-
DEN.—Individuals pay about the same portion 
of the total tax as under the current Code. 
(9) EMPHASIZING
PERSONAL
INDEPENDENCE 
AND RESPONSIBILITY.— 
(A) REINFORCING A CULTURE OF WORK 
AND THRIFT.—Instead of being solely a calcula-
tion of how much they must pay to the govern-
ment, the Simplified USA Tax converts the in-
come tax into an annual calculation of how 
much people produce and contribute to the 
economy. 
(B) GREATER
CONTROL
AND
RESPONSI-
BILITY.—Because people are not double taxed 
on their saving, they have— 
(i) more control over their own income 
and taxes, 
(ii) a greater ability to plan and pro-
vide for their own future, and 
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(iii) a fair opportunity to do so. 
(10) MORE OPPORTUNITY FOR WAGE EARNERS 
AT LOWER INCOME LEVELS.— 
(A) REFUNDABLE CREDIT FOR EMPLOYEE 
PAYROLL TAX.—The amount of the payroll tax 
paid or withheld under the Code from an em-
ployee’s wages (and paid into the Social Secu-
rity and Hospital Insurance Trust Funds) is— 
(i) credited against the employee’s in-
come tax, and 
(ii) refunded to the employee to the 
extent in excess of the employee’s income 
tax. 
(B) NO EFFECT ON TRUST FUND OR BEN-
EFITS.—The income tax credit allowed for pay-
roll taxes deposited in the Social Security Trust 
Fund does not— 
(i) reduce the amount in such fund, or 
(ii) reduce the payment of any per-
son’s benefits from the fund. 
TITLE II—SIMPLIFIED USA TAX 
FOR INDIVIDUALS 
SEC. 201. SIMPLIFIED USA TAX FOR INDIVIDUALS. 
(a) IN GENERAL.—Chapter 1 of the Code is amended 
to read as follows: 
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‘‘CHAPTER 1—SIMPLIFIED USA TAX FOR 
INDIVIDUALS 
‘‘Subchapter A. Basic rules. 
‘‘Subchapter B. Roth IRA and other savings provisions. 
‘‘Subchapter C. Basis, business transactions, and nonrecognition transactions. 
‘‘Subchapter D. Rules for exclusions from gross income. 
‘‘Subchapter E. Rules relating to deductions. 
‘‘Subchapter F. Special business activities. 
‘‘Subchapter G. Accounting methods. 
‘‘Subchapter H. Nonresident aliens. 
‘‘Subchapter I. Trusts and estates. 
‘‘Subchapter J. Definitions and rules of application. 
‘‘Subchapter A—Basic Rules 
‘‘Sec. 1. Simplified USA tax for individuals 
‘‘Sec. 2. Persons liable for the Simplified USA for individuals 
‘‘Sec. 3. Gross income 
‘‘Sec. 4. Exclusions from gross income 
‘‘Sec. 5. Alimony and child support deductions 
‘‘Sec. 6. USA deductions 
‘‘Sec. 7. Homeowner deduction 
‘‘Sec. 8. Education deduction 
‘‘Sec. 9. Philanthropic transfer deduction 
‘‘Sec. 10. Limitation on deductions 
‘‘Sec. 15. Tax rates 
‘‘Sec. 16. Kiddie tax 
‘‘Sec. 17. Rules for filing status and rate tables 
‘‘Sec. 20. USA tax credits 
‘‘Sec. 21. Family tax credit 
‘‘Sec. 22. Work tax credit 
‘‘Sec. 23. Payroll tax credit 
‘‘Sec. 24. Taxes-paid tax credit 
‘‘Sec. 25. Indexing for inflation 
‘‘SEC. 1. SIMPLIFIED USA TAX FOR INDIVIDUALS. 
‘‘(a) IMPOSITION OF TAX.—An income tax is imposed 
on each individual described in section 2. The income tax 
shall equal the amount determined by applying the tax 
schedules in section 15 to the taxable income of the tax-
payer for the taxable year and reducing the tax so deter-
mined by the USA tax credits for the taxable year. 
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‘‘(b) TAXABLE INCOME.—‘Taxable income’ means 
adjusted gross income, reduced by the USA deductions, 
including— 
‘‘(1) the homeowner deduction, 
‘‘(2) the education deduction, and 
‘‘(3) the philanthropic transfer deduction. 
‘‘(c) ADJUSTED GROSS INCOME.—‘Adjusted gross in-
come’ means gross income, reduced by— 
‘‘(1) the alimony and child support deductions, 
and 
‘‘(2) the qualified IRA deduction. 
‘‘(d) NAME.—The tax imposed by this chapter shall 
be known as the ‘Simplified USA Tax for Individuals’. 
‘‘SEC. 2. PERSONS LIABLE FOR THE SIMPLIFIED USA TAX 
FOR INDIVIDUALS. 
‘‘(a) INDIVIDUALS ONLY.—The Simplified USA Tax 
for Individuals shall apply only to individuals. 
‘‘(b) CITIZENS AND RESIDENT ALIENS.—The Sim-
plified USA Tax for Individuals shall apply to all citizens 
of the United States and to all resident aliens of the 
United States. Except as specifically provided in this chap-
ter, the Simplified USA Tax for Individuals shall not 
apply to nonresident aliens. 
‘‘(c) NONRESIDENT ALIENS.—For rules applicable to 
the compensation income of nonresident aliens, see sub-
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