House GOP Introduces Flat Tax Option As Part Of Alternative Budget

From U.S. Rep. Paul Ryan (R-Wis.)

- Tax Reform. Our budget does not raise taxes, and makes permanent the 2001 and 2003 tax laws. In fact, we cut taxes and reform the tax system. Individuals can choose to pay their federal taxes under the existing code, or move to a highly simplified system that fits on a post card, with few deductions and two rates. Specifically, couples pay 10% on their first $100,000 in income (singles on $50,000) and 25% above that. Capital gains and dividends are taxed at 15%, and the death tax is repealed. The proposal includes generous standard and personal exemptions such that a family of four earning $39,000 would not pay tax on that amount. In an effort to revive peoples’ lost savings, and to create an incentive for risk-taking and investment, the budget repeals the capital gains tax through 2010 for all taxpayers.

This is the way that tax reform must happen.  Give people a choice between the old tax system and the new and let the old way shrivel up.  It won’t be long before nearly everyone is opting for the flat tax.  At the same time, offering the option neuters the faulty argument put forward by the realtors that a flat tax would hurt home sales since people couldn’t take the home mortgage interest deduction.  They still could if they opted for the current system.  Same thing for all the others who worry about the various niches in the tax code that they’ve carved out over the years.  They’d still be there, but people would be free to either embrace or reject them.

UPDATE:  U.S. Rep. Bob Goodlatte was on Bearing Drift’s podcast yesterday and has this to say on the issue of tax reform.