I 
118TH CONGRESS 
1ST SESSION H. R. 1040 
To amend the Internal Revenue Code of 1986 to provide taxpayers a flat 
tax alternative to the current income tax system. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 14, 2023 
Mr. BURGESS introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committee on Rules, 
for a period to be subsequently determined by the Speaker, in each case 
for consideration of such provisions as fall within the jurisdiction of the 
committee concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
taxpayers a flat tax alternative to the current income 
tax system. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Flat Tax Act’’. 
SEC. 2. THE FLAT TAX. 
(a) IN GENERAL.—Subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting 
after part VII the following new part: 
VerDate Sep 11 2014 
07:27 Mar 07, 2023
Jkt 039200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS
‘‘PART VIII—THE FLAT TAX 
‘‘Sec. 60. Irrevocable election to be subject to flat tax. 
‘‘Sec. 60A. Tax imposed on individuals. 
‘‘Sec. 60B. Tax imposed on business activities. 
‘‘Sec. 60C. Tax on noncash compensation provided to employees not engaged in 
business activity. 
‘‘SEC. 60. IRREVOCABLE ELECTION TO BE SUBJECT TO 
FLAT TAX. 
‘‘(a) INDIVIDUAL.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), in lieu of the tax imposed by sections 1 
(relating to tax imposed) and 55 (relating to alter-
native minimum tax imposed), under regulations 
prescribed by the Secretary, an individual may make 
an irrevocable election to be subject to the tax im-
posed by this part. 
‘‘(2) INNOCENT SPOUSE EXCEPTION.—An indi-
vidual who has made an election under paragraph 
(1) and who subsequently obtains relief of liability 
for tax under section 6015(b) may, not later than 1 
year after the date such relief is granted, revoke the 
election made under paragraph (1). 
‘‘(b) PERSON ENGAGED IN BUSINESS ACTIVITY.—In 
lieu of the tax imposed by sections 11 (relating to tax im-
posed) and 55 (relating to alternative minimum tax im-
posed), under regulations prescribed by the Secretary, a 
person engaged in business activity may make an irrev-
VerDate Sep 11 2014 
07:27 Mar 07, 2023
Jkt 039200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS
ocable election to be subject to the tax imposed by this 
part. 
‘‘(c) DISALLOWANCE OF CREDITS.—No credit shall 
be allowed under this chapter for any taxable year to any 
person with respect to whom an election under subsection 
(a) or (b) is in effect. 
‘‘SEC. 60A. TAX IMPOSED ON INDIVIDUALS. 
‘‘(a) IN GENERAL.—There is hereby imposed on the 
taxable income of every individual who makes an election 
to be subject to this part a tax equal to— 
‘‘(1) 19 percent of the taxable income of such 
individual for such taxable year in the case of the 
first 2 taxable years of the individual beginning with 
the taxable year for which the election is made, and 
‘‘(2) 17 percent of the taxable income of such 
individual for such taxable year in the case of all 
taxable years subsequent to the taxable years de-
scribed in paragraph (1). 
‘‘(b) TAXABLE INCOME.—For purposes of this part, 
the term ‘taxable income’ means the excess of— 
‘‘(1) the sum of— 
‘‘(A) wages (as defined in section 3121(a) 
without regard to paragraph (1) thereof) which 
are paid in cash and which are received during 
VerDate Sep 11 2014 
07:27 Mar 07, 2023
Jkt 039200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS
the taxable year for services performed in the 
United States, 
‘‘(B) retirement distributions which are in-
cludible in gross income for such taxable year, 
plus 
‘‘(C) amounts received under any law of 
the United States or of any State which is in 
the nature of unemployment compensation, over 
‘‘(2) the standard deduction. 
‘‘(c) STANDARD DEDUCTION.—For purposes of this 
part— 
‘‘(1) IN GENERAL.—The term ‘standard deduc-
tion’ means the sum of— 
‘‘(A) the basic standard deduction, plus 
‘‘(B) the additional standard deduction. 
‘‘(2) BASIC STANDARD DEDUCTION.—For pur-
poses of paragraph (1), the basic standard deduction 
is— 
‘‘(A) $32,496 in the case of— 
‘‘(i) a joint return, or 
‘‘(ii) a surviving spouse (as defined in 
section 2(a)), 
‘‘(B) $20,739 in the case of a head of 
household (as defined in section 2(b)), and 
VerDate Sep 11 2014 
07:27 Mar 07, 2023
Jkt 039200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS
‘‘(C) $16,248 in the case of an indi-
vidual— 
‘‘(i) who is not married and who is 
not a surviving spouse or head of house-
hold, or 
‘‘(ii) who is a married individual filing 
a separate return. 
‘‘(3) ADDITIONAL STANDARD DEDUCTION.—For 
purposes of paragraph (1), the additional standard 
deduction is $6,998 for each dependent (as defined 
in section 152) who is a qualifying child (as defined 
in section 152(c)(1)) for the taxable year and who 
is not required to file a return for such taxable year. 
‘‘(d) RETIREMENT DISTRIBUTIONS.—For purposes 
of this section, the term ‘retirement distribution’ means 
any distribution from— 
‘‘(1) a plan described in section 401(a) which 
includes a trust exempt from tax under section 
501(a), 
‘‘(2) an annuity plan described in section 
403(a), 
‘‘(3) an annuity contract described in section 
403(b), 
‘‘(4) an individual retirement account described 
in section 408(a), 
VerDate Sep 11 2014 
07:27 Mar 07, 2023
Jkt 039200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS
‘‘(5) an individual retirement annuity described 
in section 408(b), 
‘‘(6) an eligible deferred compensation plan (as 
defined in section 457), 
‘‘(7) a governmental plan (as defined in section 
414(d)), or 
‘‘(8) a trust described in section 501(c)(18). 
Such term includes any plan, contract, account, annuity, 
or trust which, at any time, has been determined by the 
Secretary to be such a plan, contract, account, annuity, 
or trust. 
‘‘(e) INCOME OF CERTAIN CHILDREN.—For purposes 
of this part— 
‘‘(1) an individual’s taxable income shall include 
the taxable income of each dependent child of such 
individual who has not attained age 14 as of the 
close of such taxable year, and 
‘‘(2) such dependent child shall have no liability 
for tax imposed by this section with respect to such 
income and shall not be required to file a return for 
such taxable year. 
‘‘(f) INFLATION ADJUSTMENT.— 
‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning in a calendar year after 2023, each 
dollar amount contained in subsection (c) shall be 
VerDate Sep 11 2014 
07:27 Mar 07, 2023
Jkt 039200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS
‘‘(5) ROUNDING.—If any increase determined 
under paragraph (1) is not a multiple of $10, such 
increase shall be rounded to the next highest mul-
tiple of $10. 
‘‘(g) MARITAL STATUS.—For purposes of this sec-
tion, marital status shall be determined under section 
7703. 
‘‘SEC. 60B. TAX IMPOSED ON BUSINESS ACTIVITIES. 
‘‘(a) TAX IMPOSED.—There is hereby imposed on 
every person engaged in a business activity who makes an 
election to be taxed under this part a tax equal to— 
‘‘(1) 19 percent of the business taxable income 
of such person for such taxable year in the case of 
the first 2 taxable years of the person beginning 
with the taxable year for which the election is made, 
and 
‘‘(2) 17 percent of the business taxable income 
of such person for such taxable year in the case of 
all taxable years subsequent to the taxable years de-
scribed in paragraph (1). 
‘‘(b) LIABILITY FOR TAX.—The tax imposed by this 
section shall be paid by the person engaged in the business 
activity, whether such person is an individual, partnership, 
corporation, or otherwise. 
VerDate Sep 11 2014 
07:27 Mar 07, 2023
Jkt 039200
PO 00000
Frm 00008
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS
‘‘(c) BUSINESS TAXABLE INCOME.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The term ‘business taxable 
income’ means gross active income reduced by the 
deductions specified in subsection (d). 
‘‘(2) GROSS ACTIVE INCOME.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘gross active income’ means 
gross receipts from— 
‘‘(i) the sale or exchange of property 
or services in the United States by any 
person in connection with a business activ-
ity, and 
‘‘(ii) the export of property or services 
from the United States in connection with 
a business activity. 
‘‘(B) EXCHANGES.—For purposes of this 
section, the amount treated as gross receipts 
from the exchange of property or services is the 
fair market value of the property or services re-
ceived, plus any money received. 
‘‘(C) COORDINATION WITH SPECIAL RULES 
FOR
FINANCIAL
SERVICES, ETC.—Except as 
provided in subsection (e)— 
VerDate Sep 11 2014 
07:27 Mar 07, 2023
Jkt 039200
PO 00000
Frm 00009
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS
‘‘(i) the term ‘property’ does not in-
clude money or any financial instrument, 
and 
‘‘(ii) the term ‘services’ does not in-
clude financial services. 
‘‘(3) EXEMPTION FROM TAX FOR ACTIVITIES OF 
GOVERNMENTAL ENTITIES AND TAX-EXEMPT ORGA-
NIZATIONS.—For purposes of this section, the term 
‘business activity’ does not include any activity of a 
governmental entity or of any other organization 
which is exempt from tax under this chapter. 
‘‘(d) DEDUCTIONS.— 
‘‘(1) IN GENERAL.—The deductions specified in 
this subsection are— 
‘‘(A) the cost of business inputs for the 
business activity, 
‘‘(B) wages (as defined in section 3121(a) 
without regard to paragraph (1) thereof) which 
are paid in cash for services performed in the 
United States as an employee, and 
‘‘(C) retirement contributions to or under 
any plan or arrangement which makes retire-
ment distributions (as defined in section 
60A(d)) for the benefit of such employees to the 
VerDate Sep 11 2014 
07:27 Mar 07, 2023
Jkt 039200
PO 00000
Frm 00010
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS
extent such contributions are allowed as a de-
duction under section 404. 
‘‘(2) BUSINESS INPUTS.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘cost of business inputs’ 
means— 
‘‘(i) the amount paid for property sold 
or used in connection with a business ac-
tivity, 
‘‘(ii) the amount paid for services 
(other than for the services of employees, 
including fringe benefits paid by reason of 
such services) in connection with a busi-
ness activity, and 
‘‘(iii) any excise tax, sales tax, cus-
toms duty, or other separately stated levy 
imposed by a Federal, State, or local gov-
ernment on the purchase of property or 
services which are for use in connection 
with a business activity. 
Such term shall not include any tax imposed by 
chapter 2 or 21. 
‘‘(B) EXCEPTIONS.—Such term shall not 
include— 
VerDate Sep 11 2014 
07:27 Mar 07, 2023
Jkt 039200
PO 00000
Frm 00011
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS
‘‘(i) items described in subparagraphs 
(B) and (C) of paragraph (1), and 
‘‘(ii) items for personal use not in 
connection with any business activity. 
‘‘(C) EXCHANGES.—For purposes of this 
section, the amount treated as paid in connec-
tion with the exchange of property or services 
is the fair market value of the property or serv-
ices exchanged, plus any money paid. 
‘‘(e) SPECIAL RULES FOR FINANCIAL INTERMEDI-
ATION SERVICE ACTIVITIES.—In the case of the business 
activity of providing financial intermediation services, the 
taxable income from such activity shall be equal to the 
value of the intermediation services provided in such activ-
ity. 
‘‘(f) EXCEPTION FOR SERVICES PERFORMED AS EM-
PLOYEE.—For purposes of this section, the term ‘business 
activity’ does not include the performance of services by 
an employee for the employee’s employer. 
‘‘(g) CARRYOVER OF CREDIT-EQUIVALENT OF EX-
CESS DEDUCTIONS.— 
‘‘(1) IN GENERAL.—If the aggregate deductions 
for any taxable year exceed the gross active income 
for such taxable year, the credit-equivalent of such 
excess shall be allowed as a credit against the tax 
VerDate Sep 11 2014 
21:31 Mar 09, 2023
Jkt 039200
PO 00000
Frm 00012
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS
imposed by this section for the following taxable 
year. 
‘‘(2) CREDIT-EQUIVALENT OF EXCESS DEDUC-
TIONS.—For purposes of paragraph (1), the credit- 
equivalent of the excess described in paragraph (1) 
for any taxable year is an amount equal to— 
‘‘(A) the sum of— 
‘‘(i) such excess, plus 
‘‘(ii) the product of such excess and 
the 3-month Treasury rate for the last 
month of such taxable year, multiplied by 
‘‘(B) the rate of the tax imposed by sub-
section (a) for such taxable year. 
‘‘(3) CARRYOVER OF UNUSED CREDIT.—If the 
credit allowable for any taxable year by reason of 
this subsection exceeds the tax imposed by this sec-
tion for such year, then (in lieu of treating such ex-
cess as an overpayment) the sum of— 
‘‘(A) such excess, plus 
‘‘(B) the product of such excess and the 3- 
month Treasury rate for the last month of such 
taxable year, 
shall be allowed as a credit against the tax imposed 
by this section for the following taxable year. 
VerDate Sep 11 2014 
07:27 Mar 07, 2023
Jkt 039200
PO 00000
Frm 00013
Fmt 6652
Sfmt 6201
E:\BILLS\H1040.IH
H1040
kjohnson on DSK79L0C42PROD with BILLS