America has a progressive income tax system in which those with higher incomes are taxed more than those whose incomes are lower. This system uses margins, or tax brackets, to determine the percentage of income a person or company must pay. Some claim it is the fairest system because it taxes people on their ability to pay, while others wish to replace our progressive tax system with a flat or fair tax. A Flat Tax system taxes all incomes at the same percentage rate, while a Fair Tax system replaces the income tax with a national sales tax. Opponents warn that tax rates for both of these tax systems could be raised very easily.
Advocates of a flat taxation system have suggested a tax rate of 17%, meaning a person making $50,000 or $5 million would both pay 17% of this amount in taxes. This taxation system would eliminate the exemptions and deductions, including the mortgage interest deduction, which exists in our current tax code. For this reason, most people would not need to hire professionals to help complete their tax return. This would save an estimated 6 billion hours that Americans spend preparing returns each year. Opponents of the Flat Tax claim it is still an income tax, still rewards companies for offshoring jobs to places with lower taxes, and favors the wealthy because it doesn’t tax accumulated wealth even when spent.
Pending Legislation: H.R.1040 - Flat Tax Act
Sponsor: Rep. Michael Burgess (TX)
Status: Referred to the Committee on Ways and Means and 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.
House Speaker: Speaker Nancy Pelosi (CA)
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