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It’s about time someone simplifies the tax structure in this country:
Fred Thompson’s Presidential campaign has been struggling, in part because of a sense that he lacks passion and an agenda. But late last week he unveiled a tax reform that is more ambitious than anything we’ve seen so far from the rest of the GOP field.
Mr. Thompson wants to abolish the death tax and the Alternative Minimum Tax and cut the corporate income tax rate to 27% from 35%. But his really big idea is a voluntary flat tax that would give every American the option of ditching the current code in favor of filing a simple tax return with two tax rates of 10% and 25%.Mr. Thompson is getting aboard what has become a global bandwagon, with more than 20 nations having adopted some form of flat tax. Most–especially in Eastern Europe–have seen their economies grow and revenues increase as they’ve adopted low tax rates of between 13% and 25% with few exemptions.
The main political obstacle to such a reform in the U.S. has come from liberals, who favor punitive taxes for “class” reasons, and K Street corporate lobbyists who want to retain their tax-loophole empires. The housing and insurance industries, states and localities, charities, bond traders and tax preparers are all foes of low tax rates.
That’s why the idea of a voluntary flat tax–introduced on these pages a dozen years ago–makes political sense. The Thompson plan would allow taxpayers to keep their mortgage and charitable deductions if they prefer, by adhering to the current tax code and rates. But it would also allow the option to abandon those credits and deductions except for a single allowance based on family size ($39,000 for a family of four). Most taxpayers would pay a 10% rate on income above that allowance, with a 25% rate kicking in at $100,000 for a couple. There would only be five lines on the tax form and most taxpayers could fill it out in minutes.