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house Bill H.R. 1040

Should Individuals and Businesses Have the Choice of a Flat Tax Instead of the Current Tax System?

Argument in favor

An optional flat tax would dramatically simplify the tax code for Americans who choose to take advantage of it, saving them both time and money.

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05/20/2017
In the words of Ron Paul, "I lean toward a flat tax. But I want to make it real flat, like zero." Where do you get the arrogance to think you have a right to help yourself to someone else's income? And to dictate to them how much of their income you are going to help yourself to? Diminishing marginal utility is entirely irrelevant - you don't get to decide when someone else's utility is too low and you get to take what's left. You're mis-applying an economic argument and still failing the ethical argument because you are advocating TAKING SOMEONE ELSE'S MONEY. YOU ARE NOT GOOD PEOPLE. YOU ARE THIEVES. Again, where do you get the arrogance?
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operaman's Opinion
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05/19/2017
What a wonderful idea to investigate. But, other types of taxes should be eliminated. I would like to see what the base income includes for the flat tax. Would there be a increased in in sales tax? How would a flat tax effect State Income Taxes? Can't believe this proposed bill lacks detail.
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Karan's Opinion
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04/26/2017
This is only fair. I mean seriously. If someone is making $200K and someone else is making $20K they should both pay at the same percentage. You can't tax someone more percentage just because they are more successful. That's bad
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Argument opposed

Creating an optional flat tax alongside the existing tax code would let the wealthiest Americans pay less in taxes than they currently do, it’s unfair.

Chuck's Opinion
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04/26/2017
Flat taxes hurt the middle class and working poor. Only billionaires support this. Gosh I wonder why???
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GreenArrow's Opinion
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04/26/2017
Flat tax is a scam designed to dupe the foolish into helping the wealthy. The percentage they would take from the average citizen, at the average income would be significant to them, while the percentage taken from the wealthy would be barely noticeable. Ask your self this, if you make 30k a year, why should you pay as much as someone making 200k? Short answer, you shouldn't.
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Judith's Opinion
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04/26/2017
Flat tax only helps the wealthy. Have enough people said this that it's sunk in yet?!
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bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
  • The house has not voted
      house Committees
      Committee on Rules
      Committee on Ways and Means
    IntroducedFebruary 14th, 2017

What is House Bill H.R. 1040?

This bill would give individuals and businesses the choice to irrevocably opt out of the current income tax structure and instead pay a flat tax of 19 percent for the first two years, and 17 percent annually thereafter. To increase the rate of the flat tax or reduce the value of deductions, a two-thirds vote by both chambers of Congress would be required. Additionally, this bill would repeal the estate, gift, and generation-skipping transfer taxes.

The tax would be calculated by subtracting from gross income a basic standard deduction for the filing individual and additional standard deduction(s) for their dependants. For businesses it would be a similar process, with deductions for business inputs, wages, and retirement contributions taken into account.

Impact

Individuals and businesses that would prefer a flat tax; Congress; and the federal government.

Cost of House Bill H.R. 1040

A CBO cost estimate is unavailable.

More Information

In-Depth: Sponsoring Rep. Michael Burgess (R-TX) is a longtime advocate for a flat tax, and has introduced this legislation during previous sessions of Congress. Upon introducing one of this bill’s predecessors in 2011, Burgess said:

“The goal of the Freedom Flat Tax is to create a tax system that minimizes the number of market-distorting investment decisions that are made as a result of the current tax system. People should base their financial systems on common-sense economics, not the tax code. HR 1040 is simple, fair and pro-growth.”

This legislation currently has the support of one cosponsor in the House, Rep. Blake Farenthold (R-TX).


Media:

Summary by Eric Revell

(Photo Credit: kenteegardin via Flickr / Creative Commons)

AKA

Flat Tax Act

Official Title

To amend the Internal Revenue Code of 1986 to provide taxpayers a flat tax alternative to the current income tax system.

    In the words of Ron Paul, "I lean toward a flat tax. But I want to make it real flat, like zero." Where do you get the arrogance to think you have a right to help yourself to someone else's income? And to dictate to them how much of their income you are going to help yourself to? Diminishing marginal utility is entirely irrelevant - you don't get to decide when someone else's utility is too low and you get to take what's left. You're mis-applying an economic argument and still failing the ethical argument because you are advocating TAKING SOMEONE ELSE'S MONEY. YOU ARE NOT GOOD PEOPLE. YOU ARE THIEVES. Again, where do you get the arrogance?
    Like (88)
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    Flat taxes hurt the middle class and working poor. Only billionaires support this. Gosh I wonder why???
    Like (232)
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    Flat tax is a scam designed to dupe the foolish into helping the wealthy. The percentage they would take from the average citizen, at the average income would be significant to them, while the percentage taken from the wealthy would be barely noticeable. Ask your self this, if you make 30k a year, why should you pay as much as someone making 200k? Short answer, you shouldn't.
    Like (180)
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    Flat tax only helps the wealthy. Have enough people said this that it's sunk in yet?!
    Like (69)
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    What a wonderful idea to investigate. But, other types of taxes should be eliminated. I would like to see what the base income includes for the flat tax. Would there be a increased in in sales tax? How would a flat tax effect State Income Taxes? Can't believe this proposed bill lacks detail.
    Like (40)
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    This is only fair. I mean seriously. If someone is making $200K and someone else is making $20K they should both pay at the same percentage. You can't tax someone more percentage just because they are more successful. That's bad
    Like (38)
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    THIS IS THE TAX PLAN I WANT TO SEE CONGRESS PASS! Sen. Ted Cruz's Simple Flat Tax Plan Summary “Imagine 4.9 million new jobs. Instead of Obama’s income stagnation, imagine average wages rising 12.2 percent over the next decade. Capital investment rising 43.9 percent. And every income-level seeing double-digit increases in after-tax income. Imagine exports and manufacturing jobs booming. Our trade deficit falling as the tax bias against American made goods is eliminated. Imagine a 10 percent income tax, with every American filling out his or her taxes on a postcard or iPhone app. And abolishing the IRS as we know it.” – Ted Cruz VIDEO: https://www.youtube.com/watch?v=uJ90Kel-fs0 PERSONAL INCOME TAX – SINGLE RATE: 10% The Simple Flat Tax creates a simple, single-rate flat tax for individuals. The existing seven different rates of individual income tax will become one low rate: 10%. A family of four will pay no taxes on their first $36,000 of income. The plan exempts a large amount of initial income for low- and middle-income taxpayers, with a $10,000 standard deduction and $4,000 personal exemption. It also keeps the Child Tax Credit and expands and modernizes the Earned Income Tax Credit with greater anti-fraud and pro-marriage reforms. The plan keeps the charitable giving deduction and features a home mortgage interest deduction, capped at principal value of $500,000. BUSINESS FLAT TAX – SINGLE RATE: 16% The corporate income tax along with the payroll tax are abolished, replaced by a 16% Business Flat Tax. The current corporate tax code is riddled with years of accumulated loopholes and special favors, burdening U.S. businesses with the highest top tax rate among the advanced nations. This convoluted and anti-competitive structure will be replaced with a simple 16% tax on net business sales (gross sales minus expenses and capital expenditures). The current payroll tax discourages work and job creation. The vast majority of Americans pay more in payroll tax than in income tax. The Simple Flat Tax will eliminate the payroll tax, boosting jobs and wages for working Americans, while guaranteeing funding for Social Security and Medicare. UNIVERSAL SAVINGS ACCOUNTS (USA) The Simple Flat Tax creates Universal Savings Accounts (USA) allowing savings of up to $25,000 per year in tax-deferred dollars. Savers can withdraw the funds at any time for any reason – whether it be for college tuition, a down payment on a home, or their son or daughter’s wedding. This savings feature harmonizes with the tax elements of the Cruz Simple Flat Tax to move toward encouraging savings and investment – a recipe for economic growth and jobs. RESULTS: GROWTH AND OPPORTUNITY – The Tax Foundation estimates that the Cruz Simple Flat Tax will, over ten years, increase the size of the U.S. economy by 13.9% above what is currently projected, create an additional 4.86 million jobs, and boost wages by 12.2%. Every category of worker will see a double-digit increase in after-tax income. OTHER TAXES ELIMINATED • Death Tax. • Overseas profits tax. • The Alternative Minimum Tax. • The Obamacare taxes. BENEFITS FOR FAMILIES AND ENTERPRISE Imagine a tax plan that: 1.) Ends the IRS and the Washington Cartel: • Abolishes the IRS as we know it, and ends the use of the tax code as a political weapon, with a simple tax code that is transparent and resistant to corruption. • Eliminates the complexity that invites government mischief, corporate welfare, and cronyism so that public faith in the tax system’s fairness can be restored. • Reduces tax evasion and makes sure all businesses pay their fair share at one flat rate. • Defeats the army of lobbyists allied with politicians – the Washington Cartel – that now sneaks benefits into the tax laws for friends and punishments for foes. Instead of the government choosing winners and losers, individuals and businesses will be free to prosper on their own merit. • Ends the injustice of cronyism and the hidden costs associated with it, which currently damage the nation’s competitiveness and stifle the wages of ordinary Americans. By breaking the Cartel, these costs will end too, and businesses will be free to thrive, hire, and grow. • Establishes a simple rate for individuals and businesses that is highly visible, which deflects the tendency of politicians to raise tax rates. 2.) Ignites Growth: • Repeals the corporate income tax, with the highest top rate among developed nations, and stops driving jobs and business overseas. By replacing the corporate income tax with a Business Flat Tax, jobs and growth will return to American soil, and a chronic source of temptation to tinker with the tax code through corporate loopholes will be eliminated. • Allows for full and immediate expensing of business equipment, which will remove the burdens imposed by the current system on heavy industry, mining, energy, farming, ranching, and manufacturing. • Removes the current tax penalty on American businesses that earn profits abroad, encouraging those businesses to bring profits home. Businesses will flock to America rather than keep money abroad or move overseas to escape high tax rates – and jobs and growth will come home with them. Under the Simple Flat Tax, U.S. businesses could return their overseas profits to American soil for a one-time 10 percent repatriation fee. • Eliminates a current competitive disadvantage for American products through border adjustability: foreign imports will be subject to the Business Flat Tax and American exports will have the tax removed, giving U.S. businesses a level playing field. 3.) Provides Opportunity for Everyone: • Spares citizens from hundreds of wasted hours and expenses in tax compliance – Americans will instead be able to file their taxes on a postcard or a phone app. • Ensures that low- and middle-income Americans have the opportunity to build their wealth and prosper by exempting the first $36,000 of income for a family of four. • Allows for automation of compliance. Instead of having individuals report every detail about dividend or interest income, for example, banks, brokers, and financial institutions would simply withhold the tax. • Eliminates the injustice and burdens of the Death Tax, the Alternative Minimum Tax, and the Obamacare taxes. Family farms and businesses can stay in the family. • Enables Americans to save up to $25,000 annually tax-deferred in the Universal Savings Accounts (USA), allowing them to begin a nest-egg and secure their future and that of their children. IMAGE: THE CRUZ SIMPLE FLAT TAX POSTCARD https://www.tedcruz.org/tax_plan_summary/
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    My Reps don't seem to care what we think
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    As I read all the LIBERAL comments on here it becomes clear how poorly educated people really are? Lowering business taxes will not hurt the poor people as they pay nothing now! Most small businesses owners are by definition Middle Class. They are the heart of our American economy. When they thrive America thrives. Support this tax and help the middle class....and please take an Economics course and stop relying on CNN and the like for information.....
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    "Only billionaires support this" I call bull on that comment. I'm nowhere even near a millionaire, I'm quite reasonably middle class, and I do support it. That's the thing. I want those richer then me to remain successful, legitimately. The flat tax is meant to help push people up the monetary ladder and not push anyone down. The only people it hurts are those who cannot help themselves, such as people who are addicted to drugs and can't stop buying them long enough to get out of poverty. The only reason so many hate the idea is they're to lazy to go at it themselves and make their own living and not waste money of their own or others to the point they are impoverished.
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    If someone asks why there is a graduated tax rate, the answer is: diminishing marginal utility. In less technical terms, the more of a thing you have, the less each single one is able to impact your life. If you have one chocolate cake, it's a great day! If you have 6,000 chocolate cakes, your day is not 6,000 times better. Someone making $20k is impacted more by a 19% tax in terms of the minimum bills they need to pay for food and shelter than someone making $200k. From the book The Wealth of Nations, the poor spend their money on the basic needs of life, while the wealthy can spend money on luxuries. Because of that, it is not unreasonable to impose a higher rate on the wealthy; if taxes are a necessary evil to fund the Federal Gov't (see the collapse of the articles of confederation for why), then the poor are the ones most impacted by that tax. 19% may represent the same percentage of overall income in a flat tax system, but it is regressive with regards to the lower income bracket's ability to buy food and pay rent.
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    Flat taxes are an attack on the poor and hard working middle class Americans. Flat taxes are regressive and we should aspire to create a more progressive tax system.
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    Eliminate the IRS and impose a universal flat tax now. The late Congressman Jack Kemp had this idea a quarter of a century ago. It was brilliant and relevant then just as it is today. In other words, this is LONG overdue and common sense. Time to simply and streamline our lives.
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    Flat tax favors the rich and punishes the other 98%. You represent more people that are part of the 98%, they are the majority of your constituents. The wealthy may be giving you "donations" but they can't re-elect you on their own. Together the 98% elect you and pay your salary, hopefully that is more then the "donations" you receive.
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    A flat tax would be a massive transfer of money to the wealthiest taxpayers. A progressive income tax is much more fair.
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    This is the ridiculous Trump Tax Plan. Flat taxes benefit the wealthy and penalize the middle class. The top 1% will pay lower and lower. The repeal of the estate tax will save a family like the Waltons (of Walmart fame) $35 million in taxes alone. I don't see them paying their workers enough to live, so I certainly don't see them helping our hospitals, schools, infrastructure, etc. This plan will triple the debt and continue to devastate our country's basic infrastructure systems. Wake up!!!!
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    Taxes are our dues for living in this country. Our infrastructure is falling apart, public education has been funded less and less, safety nets for the elderly, disabled, children, and those less fortunate have been cut to disgusting levels. No more tax breaks, especially to those who need it the least!
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    marginal utility says that a person paying $300 on an income of $15,000 is going to have a harder time getting by on someone $5000 on an income of $250,000
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    WITHOUT loopholes -ANY loopholes - and a tax rate that is high enough to reflect the success of the business, I think the choice for a flat tax would be a good idea. Small businesses don't have the resources to higher CPAs who can find the largest cuts and hiding places for their funds to keep them tax free. Having a flat tax as an option would be a good choice. However, my first caveat is the most important: The loopholes that we find in our system today have resulted in the corporate welfare that is breaking our country. They must be closed before anything else is done.
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    The most fair option.
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