Statements on Introduced Bills and Joint Resolutions

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. WYDEN:

S. 1927. A bill to amend the Internal Revenue Code of 1986 to make the Federal income tax system simpler, fairer, and more fiscally responsible, and for other purposes; to the Committee on Finance.

Mr. WYDEN. Mr. President, today I am proposing a Fair Flat Tax Act that will finally provide real tax relief to America's hurting middle class. It will do so by making the tax system simpler, flatter and fairer. And at the same time, it will begin to reduce the deficit that is destabilizing our economy, our security and our future.

This tax reform proposal is simpler because it's easier to understand and use. My legislation will include a new, simplified 1040 form that is one page, 30 lines, for every individual taxpayer.

This plan is flatter because it collapses the current system of six individual tax brackets down to three--15, 25 and 35 percent--and creates a flat corporate rate of 35 percent.

Ultimately, this plan is fairer because it changes the laws that disproportionately favor the most affluent Americans and corporations at the expense of the middle class. Instead, it provides a major middle-class tax cut--paid for by the elimination of scores of tax breaks in the individual and corporate income tax breaks, and by repealing the Bush tax cuts that favored the most fortunate few at the expense of the many.

This plan is fairer for American taxpayers because it treats work and wealth equally.

This is a radical statement about tax law: America can do better than a two-tier system which forces a policeman to pay a higher effective tax rate than an investor who makes his income on capital gains and dividends.

Under the current Federal Tax Code, all income is not created equal in this country. Americans who work for wages, in effect, subsidize the tax cuts and credits and deferrals of those who make money through unearned income--the dividends from investments. It's time to treat all taxpayers the same.

Let me be clear: I am not interested in soaking investors. I am a Democrat who believes in markets, and creating wealth. But what our country is all about is equality, and our Tax Code should treat everyone's income more equally too.

My legislation, The Fair Flat Tax Act of 2005, adapts the flat tax idea to help reduce the deficit instead, through fewer exclusions, exemptions, deductions, deferrals, credits and special rates for certain businesses and activities, and through the setting of a single, flat corporate rate of 35 percent. On the individual side, it ends favoritism for itemizers while improving deductions across the board: The standard deduction would be tripled for single filers from $5,000 to $15,000 and raised from $10,000 to $30,000 for married couples. Six individual rates are collapsed into three progressive rates of 15 percent, 25 percent and 35 percent, and income from all sources is taxed the same.

Several deductions used most frequently by individuals, those for home mortgage interest and charitable contributions, and the credits for children, education and earned income are retained. No one would have to calculate their taxes twice: this proposal eliminates the individual Alternative Minimum Tax (AMT), which could snare as many as 21 million American taxpayers in 2006.

This proposal would eliminate an estimated $20 billion each year in special breaks for corporations, and direct the Treasury Secretary to identify and report to Congress an additional $10 billion in savings from tax expenditures that subsidize inefficiencies in the health care system. Eliminating these breaks would sustain current benefits for our men and women in uniform, our veterans and the elderly and disabled--as well as breaks that promote savings and help families pay for health care and education.

What makes the Fair Flat Tax Act truly unique is that it corrects one of the most glaring inequities in the current tax system: regressive State and local taxes. Under current law, low and middle income taxpayers get hit with a double whammy: compared to wealthy Americans, they pay more of their income in State and local taxes. Poor families pay more than 11 percent and middle income families pay about 10 percent of their income in State and local taxes, while wealthier taxpayers only pay five percent. And because many low and middle income taxpayers don't itemize, they get no credit on their Federal form for paying State and local taxes. In fact, two-thirds of the Federal deduction for State and local taxes goes to those with incomes above $100,000. Under the Fair Flat Tax Act for the first time the Federal code would look at the entire picture, at an individual's combined Federal, State and local tax burden, and give credit to low and middle income individuals to correct for regressive State and local taxes.

Repealing some individual tax credits, deductions and exclusions from income--along with some serious changes to the corporate Tax Code--enables larger standard deductions and broader middle-class tax relief.

The deductions most important to most Americans remain in place: the home mortgage deduction stays, as do child credits and charitable contributions, higher education and health savings.

What all this means for American taxpayers is--the vast majority of taxpayers will see a cut, particularly the middle class. Congressional Research Service experts tell us that middle class families and families with wage and salary incomes up to $150,000 will see tax relief.

On the corporate side--this plan does something that may not be popular, but it's right.

Each of us, including America's corporations, need to pay our fair share. Corporations that have used tax loopholes to avoid paying their fair share of taxes are going to see those loopholes close and they're going to contribute.

This legislation makes concrete progress toward deficit reduction. There's a long way to go to stop the hemorrhaging in the Federal budget, but this legislation makes a real start by whittling the deficit down approximately $100 billion over five years.

Some may wonder if what I am proposing today is a response to the President's Tax Reform Advisory Panel. To date, the Panel hasn't officially released its recommendations. I can't respond to something that hasn't been introduced yet. But I am troubled by the fact that the recommendations trickling out from the Panel would continue to twist the Tax Code away from equal treatment of all income, widening the chasm between people who get wages and people who collect dividends.

I am introducing The Fair Flat Tax Act of 2005 today to provide Americans a plan based on common-sense principles that can make the Tax Code work better.

Making the Tax Code simpler and flatter is going to make it fairer. My legislation is going to provide real relief to the middle class. It will treat work and wealth equally. It will make a start at reducing the deficit. I am ready to get to work with my colleagues and move it forward.

I ask unanimous consent that the text of the bill be printed in the RECORD.

There being no objection, the bill was ordered to be printed in the RECORD, as follows:

S. 1927

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