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  • Morning Bell: It's Time to Kiss the Tax Code Goodbye

    Ready for a new year and another bout with the Internal Revenue Service, deductions, exemptions, pens and pencils, calculators, receipts, 1040s, W-2s, accountants, Quicken, TurboTax, and more? If you’re like most Americans, that laundry list of income tax jargon, paraphernalia, professionals and their fees is enough to set your head spinning — and even if it isn’t, the thought of paying Uncle Sam your annual dues will certainly do the trick.

    America’s tax code needs reform, plain and simple. The current tax system discourages saving, investment, and entrepreneurship. It’s a drag on productivity, job growth, international competitiveness, and wages. It’s complicated beyond belief, and it needs to change. The good news is that there’s a solution that would spell the end of America’s convoluted tax code once and for all: The Heritage Foundation’s “New Flat Tax.” It’s as easy as one, two, three, and here’s what you need to know about it:

    1) The New Flat Tax is simple, coherent, and comprehensive.

    Under the New Flat Tax, American taxpayers will pay a single, simple tax rate–roughly 28 percent. It replaces all federal income taxes, as well as the death tax, payroll taxes, and all excises not dedicated to a trust fund. It also includes a $3,500 health insurance tax credit for low and middle-income families who purchase policies, it includes an anti-poverty tax credit for low-wage workers, and it includes deductions for higher education, charitable contributions, and an optional home mortgage interest deduction.

    In his new paper, J.D. Foster, the Norman B. Ture Senior Fellow in the Economics of Fiscal Policy at The Heritage Foundation, explains how such a system will benefit all Americans and make for a stronger economy:

    The design of the New Flat Tax is based on the need for a more coherent tax system. An even greater priority than policy coherence is the need to eliminate, insofar as possible, any loss of economic performance due to federal taxation.

    Unnecessarily high tax rates combined with ill-advised tax rules distort the economic decisions of businesses and families. In turn, the economy is left much weaker by these distortions. A stronger, larger economy is the primary goal of the New Flat Tax, which would achieve this goal by implementing an economically neutral tax base and by lowering rates as much as possible.

    2) Seniors will see great relief under the New Flat Tax system.

    For non-seniors, the New Flat Tax is as easy as one, two, three–one rate, two credits, three deductions. For seniors on Medicare, one of the two credits–for health insurance–is replaced by an extra deduction. The plan includes Social Security and Medicare measures to ensure that no senior is left in poverty, protects the Social Security and Medicare trust funds, and it encourages seniors to stay in the workforce longer by excluding the first $10,000 of a senior’s wages and salary from tax. As Foster explains, that provision is especially important for low-income and middle-income seniors.

    3) Businesses and job creators will benefit from a new, simplified system.

    The United States must remain competitive on the global stage, particularly as countries like China and India become economically stronger. Unfortunately, today’s tax code negatively impacts businesses and distorts their decision making, produces an uneven playing field that benefits some while harming others, and creates hurdles for business growth, development, and investment. And that leads to a weaker economy.

    Under the New Flat Tax, businesses will achieve much-needed relief, including measures that reduce the business tax rate to the level of the individual rate over time, fully eliminate double taxation, repeal special provisions and tax credits in existing law while maintaining the research and experimentation credit, and makes the taxation of international commerce fairer. Foster explains that the sweeping reforms will pay dividends for the U.S. economy:

    The New Flat Tax levies a simple tax on businesses’ domestic net cash flow so all compensation provided to employees and all purchases from other businesses are deducted from gross domestic receipts. This treatment applies to all business entities. In addition to the great simplification this system provides over the income tax, it also means businesses can deduct purchases of new equipment immediately, thus eliminating a crucial tax bias against business investment.

    America’s taxpayers–individuals and businesses alike–perpetually suffer under the tax code, its complexities, its burdens, and its consequences. It’s high time that Congress reform the federal tax system, and Heritage’s New Flat Tax is the answer. It simplifies the system, provides transparency, and opens the door for the economic growth that America so desperately needs.

    Quick Hits:

    Posted in Economics [slideshow_deploy]

    186 Responses to Morning Bell: It's Time to Kiss the Tax Code Goodbye

    1. Ken G says:

      This sounds like it will raise taxes on the Middle Class while relieving the poor and the rich unless there's something about it you haven't explained. Likewise I'm wondering how it would tax income from dividends and capital gains. As you say, no use taxing them twice, but income from capital should be taxed just as income from employment.

    2. Lew in Fla. says:

      A flat tax, in my opinion, should have no exceptions and no exemptions. This is a start in the right direction, but the rate is too high. No more than 10% should be required to fund the 'essential' services that government can provide. "Essential' are those services that government provides that we cannot provide for ourselves, like national defense.

      • Candy says:

        I cannot believe that the Heritage Foundation, which claims to be conservative would promote a confiscatory 28% tax. A flat tax should be no more than 10%, even with the inclusion of several exemptions. All great countries historically got by with less than half of the proposed 28%. China found that 12 government officials/workers per 1000 population was optimum. Any fewer and the work wouldn't get done, any more and the number of government employee could not be afforded.

        • Independant says:

          There's probably deductions in their Plan. However, I agree with you that a flat 10% rate would be more than enough. Back in the '70s some Politition came up with this suggestion and indicated that the Feds would have more in Tax Revenues, while helping the Middle and Lower income levels.

    3. Gordon Oosterhouse says:

      So, as my wife and I (retired seniors) struggle to get along on a very limited income, what would happen to us at the grocery store and gas station with a consumption tax? My guess is we would be in even more trouble with this plan or anything like it!

    4. Bob says:

      NO, NO, NO. A sales tax and BAN any and all other taxes. No more taking an old couples home for failure to pay their property tax. No more "car" tax each year for something you already paid for. No need for the IRS and the Government knowing or caring how much you make, how many kids you have, if you are married or not. Nation sales tax on everything so the Government can't rig the system.

      • Independant says:

        Bob, my concern is that the Sales Tax would have to be HIGH, and if that's the case, the old retired guy eats just as much as the high paid worker. I'll admit that the worker spends more in the long run. I do agree with you about paying a car tax every year, and as far as property tax, those over 65 and retired should be exempted from property tax. Also why deductions for having kids when we are over populating the world. I believe that a couple of guys like us could sit aroung the table and come up with a Tax Plan that most people would agree to. Have a great day!

    5. Mary......WI says:

      Sounds like a great plan! Now how do you sell it to politicians, attorneys, and liberals?! And I'm sure politicians will impose all kinds of other taxes on the American people. Of course, if Obama is re-elected all of this doesn't matter because this country will become 100% socialized.

    6. EHeassler, USN-Ret. says:

      You must be kidding! I just retired, like yesterday. Now you are proposing to raise my taxes by 50% just for federal taxes. When NY is done with me, my effective tax rate will be over 40% on a modest retirement income.

    7. JOHN PAUL JONES says:

      PRAISE THE LORD. Common Sense plan that has long been needed. Everyone, I mean everyone, will pay their FAIR SHARE.

    8. Daniel P says:

      I like the general idea, but are you really going to tax the poor at the same rate as the rich? I'm conservative and even I don't think thats fair. The dollar means a ton more to the poor than the rich. If you take $28 from a guy that makes $100, thats pretty painful. If you take $28,000 from a guy that makes $100,000, its not so painful. Painful, yes. But not as much. Taxes should always be graduated to take a higher percentage from the rich.

      • Nick C says:

        But see, with progressive taxes, you give people an incentive to be poor. For example, I know a man who works at PG&E as a manager of sorts. The people who work under him know exactly how much money they can make before they are put in the next tax bracket. As a result, PG&E can't get anyone to work any overtime after a certain time of the year because people know to the dollar how much money to earn. As a result, it artificially distorts people's incentives to work. It also costs the government money, because people have incentive not to get richer, therefore limiting the revenue that can be generated by the government. That is why I don't like progressive taxes. Now don't get me wrong, I don't think regressive taxes are a good idea either, which is why the deductions and credits are kept under this plan. In your next comment, you say that the tax code gives people incentives to do certain things. I'd just like to point out that the status quo does the exact same thing. First of all, without the Charitable donations deduction, there will be less charitable donation. Several Experts agree about this. Secondly, the point of the educational deduction is not to give people incentives to go to school (which, by the way, is not a bad thing), they are to assist people who want to have higher education. Lower class citizens might not have the ability to get higher education, which is why the deduction is kept.

    9. Daniel P says:

      Now, why are you messing with your newly formed tax code already? If you pass your current plan, you've already given $3,500 health insurance tax credit , an anti-poverty tax credit for low-wage workers, and deductions for higher education, charitable contributions, and an optional home mortgage interest deduction. You're essentially saying that we should use the tax code to push people to do certain things – go to school, donate, buy a house. People will do this without the federal government's help. Stop pandering to people with the mortgage interest deduction. They don't need an incentive to gain equity in a house or gain education so they can have better, higher paying jobs. Be truly conservative and get rid of these ridiculous deductions. Thats how the tax code got screwed up in the first place. The path is paved with good intentions…

    10. Daniel P says:

      At least your headed in the right direction. One more change needs to be seriously considered. Every person should have to file their own return. No more "Married Filing Jointly, "Married Filing Separately," or "Head of Household." First, its confusing. And second it puts liability on the non-working homemaker and creates situations of Innocent/Injured Spouse. There are tens of thousands of court cases where ex-spouses seek to be relieved from joint liability because a spouse lied/cheated on their tax return. I'm a tax attorney and its heartbreaking when a 70 year old women owes $250,000 because the money-making spouse pushed the tax return to the homemaker and said "sign here." Only the tax was never paid, and now both spouses owe a ton but only one works. Fix this situation all together. Make it a legal requirement to file. If you make $0, file a $0 return. No deductions for children so married people don't have to worry about who gets to claim them, and the IRS doesn't have to track down false Social Security Numbers.

    11. chatmandu002 says:

      Bring it on…..

      • Kimo says:

        After study, in all countries that have a flat tax, the economy is doing well. It also seems the best way to be in line with the constitution. We think 10 percent, would bring the country intoi the gfreen within 5 years, so 28 perc4ent, would surely be enough, to save the enconmy, take care of the old and young, and stop corruption and legal looting. And yes, I am a republican, turned libertarian. It will be quite a battle, to oust the banks and special interests. if there IS an answer, this IS it. no doubt. To make congress follow common sense, is quite another.

    12. Greg says:

      Outstanding idea but the tax industry special interests will block this at every step, I fear–tax accountants, tax and estate lawyers, tax seminars and publications, software companies, other direct and indirect interests and even the IRS itself won't want to see this happen. It will require courage and a persistant, wide spread effort.

      • Michael Wensink says:

        Greg – you just described why it will never happen with the current congress. Change them first and you might have a chance.

    13. Ron Bach says:

      A better tax is the FairTax. Do the research. It's your money and there are no hidden taxes from the standpoint that you choose where and when to pay your tax. You keep every dime you earn until you go and buy something new that YOU want. Fairtax .org Check it out.

    14. Steve says:

      "It simplifies the system, provides transparency, and opens the door for the economic growth that America so desperately needs." – Whoops, that would be a huge problem. Do you really think that is what congress wants? Not likely. They like way too much tinkering with the tax code and as soon as you implement something like this the tinkering would start. In a few years we would be right back to where we are today.

    15. Martin says:

      In evaluating the plan, you state that lower income people in the 10% and 15% bracket really pay 25% to 30%. In reality part of that burden is paid by the employer. Under this plan the employer evidently is under no obligation to pay that same amount to the work in wages. So really there will be an out of pocket increase payable to this same extent by every one in the lower and middle classes.

    16. Sandi says:

      A flat tax is the obvious answer to the problems, but it will never happen. The political players won't ever let go of their ability to control our behavior with the tax code, and that includes the so-called conservatives.

    17. Geno says:

      What is this anti-poverty tax credit crap? How does that work? Why should people get money back that they didn't pay in? Or am I missing something?

    18. bob says:

      how about a 12% flat tax with NO deductions?

      • ExV1x says:

        Absolutely. THAT'S a flat tax. I'm very disappointed that Heritage would propose something like this. Right off the bat, the rate is too high and there are already ways to game the system.
        FLAT RATE for EVERYBODY, under 15%, with NO deductions, period. Any member of congress that introduces any new deduction or an increase in the rate is lined up against a wall,and shot.

      • glynnda says:

        THANK YOU!!!!! 28%….HOLY CRAP!!!!

      • FlaJim says:

        28% is far too high. 12% sounds about right. The whole thing should be tied to eliminating whole government departments and agencies, slashing the government workforce, and refusing to accept any unionization of federal employees.

        Further, corporate taxes should be 0%. Their products are taxed, their purchases are taxed, and their shareholders are taxed. How many layers of taxes are enough for these rapacious blood suckers.

        BTW, I complete about 150 to 200 tax returns a year (personal and small business) and would welcome the role of a simple bookkeeper.

      • coloradohawkeye says:

        This is the answer! The law should explicitly state 12% with "No deductions or credits". Giving the clowns in DC the ability to create credits and deductions is how we got here in the first place. Low flat tax rate with no loopholes needs to be the goal. Everyone pays in and nobody can "game" the system. One question- where did you come up with 12%? Any backup would be appreciated.

    19. Dan says:

      Simple yes, but my back-of the-envelope calculation shows I would be paying an additional $10,000 in taxes under this flat tax. 28% seems extraordinarily high for a flat tax rate. And by the way, Turbo Tax tells me each year that I pay a greater amount of taxes than the average tax payer in my bracket because I don't have as many deductions. How can this possibly be revenue neutral?

    20. George Spillman says:

      I love the idea of a flat tax, but have a question. Would I have to pay 28% on my retirement income? I pay no payroll tax since I have no "wages". Seems like the Seniors' taxes would go up unless they get some reduction in the tax rate.

      • George says:

        What a sneaky way to retax retirement income. Effectively, the government would tax for social security from people who are receiving it. Is this dumb or an insidious way to increase taxes? What we need is a low flat (no greater than 20%) tax or a national sales tax to replace the income tax – and by replace it, I mean constitutionally. And we need to make sure that it does not have all sorts of loopholes. Sorry no go Heritage. I can't believe that Heritage is not stocked with better thinkers.

      • kimo says:

        That's right. And the marriage penalty still seems to be in there also. What about that??

    21. Willie says:

      Already the proposal includes deductions and credits. This is how we got to the current taxing system. As long as there are some deductions or credits, what stops a future Congress from adding more, or making them complex, or temporary, or focused on certain societal groups?

    22. DaveB says:

      The only fair way to go is a national sales tax. That way everyone pays; illegals, drug dealers and ordinary citizens pay the same. The Government sends every citizen and legal a check each month to cover their basic needs. Stop taxing corporations. Corporations do not pay income tax. The pass it on to the folks at the consumer level.

    23. Bruce says:

      The Fair tax would be much better

      • bassboat says:

        Absolutely! More money would be put in Joe Six Pack's billfold and when he finds out that the moochers in DC didn't address this they will be kicked out by the hundreds.

    24. Matt - PA says:

      Sorry — good idea, wrong tax rate. I have a pretty good income, and my effective rate (not top nominal rate) is still well below 28%. I feel that I already pay too much in taxes — why in the world would I want to pay more. This is not a rich vs. poor argument — I am among the top 10% of taxpayers. And from the wording that it replaces payroll taxes…'excluding those dedicated to trust funds' — that means that the major payroll taxes are still there — Social Security (FICA) and Medicare, which are trust fund taxes — so the real tax rate is more like 35%+!

      No thank — either this article is incomplete in describing the new flat tax, or they need to go back to the drawing board. I'll give the benefit of the doubt that they didn't intend for big tax increases on the 2-10%, to employ the Occupy lingo (the bottom 50% of tax-filers do deserve a tax increase, being that they pay no taxes at all on their income).

      • Michael Monnet says:

        You already pay a high tax rate through the invisible taxes that get passed up and down the line of consumption. How much of a gallon milk at the store is covering taxes that the producer and distributor passed on to you? I bet it is close to 23 to 25 %. According the The Fair Tax (fairtax.org) and Herman Cain's 9-9-9 plan both with which I am more familiar, hidden taxes go away and the cost of items stays about the same but is more transparent. Not to mention that black market, and hidden entities can't hide money from the Tax burden anymore.

        I suggest you read about the Fairtax at Fairtax.org to get more specifics. I'm curious why Heritage likes their plan more than the Fair Tax but either one would be a huge improvement.

    25. Christian First says:

      The problem with this plan is, it's still providing entitlements. No matter how much frosting you put on this cake, entitlements are incentives for poor people to stay stat way. How's that fair?
      Until we as a society stop coddling underachievers we will be a society OF underachivers.
      Do people fallen on hard times, most physical disorders, and many mental disorders deserve support? Absolutely!
      But paying / rewarding people to be average is not the answer either.
      If people want to be lazy, that's fine they have that right, but it does not give them the right to tell me how much support they deserve. If you want live off the backs of others, you loose you right to vote.
      Same for politicians, how is a politician that votes in general elections – NOT a conflict of interest?

      • RGeorgeDunn says:

        We need constitutonal conduct which moves federal entitlements back to the States, wheere th eConstitutional responsibility of these exists. The best way is to provide a private IRA, with a ryder, HSA. This will not only end the federal entitlements via a transitional for those needing, but it will bring investment to our own communities. To affor the transtion, we need the FairTax plan, which takes the 22% embedded Federal taxes out of the price of domestic product so we can compete with imports to get more jobs then workers. http://rgeorgedunn.blogspot.com/p/obamacare-ratio

      • doc-polymer says:

        That's hitting the nail derictly on the head, good comment

    26. navycop10 says:

      Any income tax punishes success. Flat or not. We must have the FairTax!

    27. c t blomstrom says:

      Any tax that requires reporting is by its nature one that will create cheating and fraud resulting in no reporting or under reporting. A national sales tax, without any income tax, would tax all who purchase anything at an established business. In addition it would require very few federal employees to administer.

    28. david brown says:

      This is how what we have now started

    29. Warren Miller says:

      A flat tax was tried under Reagan's administration but it didn't work! The reason is that in defining "income" politicians immediately began carving out revenue and expanding "deductions" of their well heeled benefactors… thus today's convoluted tax code that no one can understand.

      This plan is a noble attempt at streamlining and reducing the tax code but, it too will suffer the same fate.
      Further, it does absolutely nothing to tax those people (including non-citizens) that operate below the radar of the IRS. More important it is a tax on the creation of income… what you tax you get less of!

      • Missy says:

        When was it tried under Reagan?

        • Michael Wensink says:

          Reagan eliminated most of the marginal tax brackets (not all) so it was a modified flat tax with deductions and special treatment of non wage income. That is why it failed, it quickly returned to business as usual.

      • Michael Wensink says:

        Add a personal exemption for each household of $15000.00 and personal exemption of $5000.00 for every household under $40,000.00 annual income and you have an excellent plan. Government has no business taxing the people it has failed. No one should pay tax until they have been housed, fed and educated. Raise the rate to make up the difference. NO DEDUCTIONS!!!!!!!! NO SPECIAL TREATMENT OF NON WAGE INCOME!!!!!!!!!!!!!!!!!!!!!!!!!!!! Otherwise it will be business as usual.

    30. Dick says:

      What are the projected revenues from this plan?

    31. Steve Sanders says:

      The New Flat Tax as explained makes perfect sense, and is a monumental improvement over the current tax code, hands down. However, it seems that a much less regulatory and inherently equitable approach would be to not have taxes based on income, but, rather, on spending. A national sales tax (with a modest rate determined after a trimmed, balanced budget is achieved) would be much preferred for its even greater simplicity, equity, and incentive to earn.

    32. Matt - PA says:

      Sorry — good idea, wrong tax rate. I have a pretty good income, and my effective rate (not top nominal rate) is still well below 28%. I feel that I already pay too much in taxes — why in the world would I want to pay more. This is not a rich vs. poor argument — I am among the top 10% of taxpayers. And from the wording that it replaces payroll taxes…'excluding those dedicated to trust funds' — that means that the major payroll taxes are still there — Social Security (FICA) and Medicare, which are trust fund taxes — so the real tax rate is more like 35%+!

    33. RGeorgeDunn says:

      The reason our current tax code is wrong is it leaves federal taxation in the price of product, making our inability to compete in this free trade world. That is why we have lost all the US Industry to overseas. We cannot compete with imports. How woul dthis appearing very RINO smoke and mirrors proposal be any different.

      FairTax ends all federal taxation in the price of domestic product, giving domestic product a 15% boost in competing with imports in our own land, not to mention in exports. How can you deny the 15+ year of vetting and over 20 million dollars in research and study on the value of the current Bill sitting in congress?

      If I hear one more time that FairTax is dead on arrival because the establishement will not even look at it, makes FairTax the very plan we need. And Heritage knows this. I am ashamed.

      • Ben C. says:

        I agree. The Fair Tax is really the way to go. The problem with our current code and the Flat Tax is that loop holes WILL BE created and creative people will find ways to avoid paying the tax. And then more regulations and the cycle continues ad nauseum. The other problem with any income tax is the underground economy – unreported cash transactions. While it is "illegal" it has got be the largest growing sector of our economy. The FAir Tax makes this a moot point. Accountants / CPA's will then become business advisors and not business historians as they are today. But then, has Congress EVER done anything that makes sense?

      • Laura McCue says:

        I am ashamed too that the Heritage Foundation has decided to go with the Flat Tax idea because they think that the FairTax cannot happen. I have heard many at the HF say they like the FairTax better.
        The Heritage Foundation should be working towards a tax plan that returns power to the people and supports savings and investments and productive work instead of supporting spending and debt.

    34. Karen says:

      what will the flat tax do to ministers who make a menial wage for the most part? No self-employed tax deductions which really help them, will increase greatly what they pay in taxes! Can you give me an idea
      how this will affect them. many do not make over $25,000 a year and have families and struggle.

      • Jack says:

        The answer is simple. Ministers would start paying tax on ALL OF THEIR INCOME as the rest of us do. Most ministers I know make much more than $25,000 a year, and much of their income is non taxable.

    35. Anne F. Hanson says:

      Sounds great. Most people would be supporters & Dems who are on the fence would face repercussions In the '12 elections. It should be proposed before the election. Anne F. Hanson

    36. Dwain says:

      Not a very conservative approach if people recieve money they didn’t earn.

      Secondly, the buseness tax needs to be lowered to 15%, not 28%, a far more competitive rate.

    37. Warren Miller says:

      A flat tax was tried under Reagan's administration but it didn't work! The reason is that in defining "income" politicians immediately began carving out revenue and expanding "deductions" of their well heeled benefactors… thus today's convoluted tax code that no one can understand. This plan is a noble attempt at streamlining and reducing the tax code but, it too will suffer the same fate. Further, it does absolutely nothing to tax those people (including non-citizens) that operate below the radar of the IRS. More important it is a tax on the creation of income… what you tax you get less of!

      • Warren Miller says:

        The FairTax is a CONSUMPTION based tax that is unavoidable for those currently dodging their share of taxes by under or non-reporting of income. The FairTax offers simplicity, understandability, fairness and does not tax those who are poor and living below the poverty level. The work of the FairTax plan has been thoroughly vetted by economists, business leaders, labor leaders and members of congress…. all that is needed is a President to lead and with the courage to make it happen. Politicians hate it because it removes class warfare arguments, removes their ability to grant favors to special campaign benefactors, and in general nullifies their capability to use our tax dollars to buy votes.

      • herbert says:

        Agreed. Income should not be involved in tax assessment. Income is a private matter, whereas spending is easy to identify and is done every day, and is recorded. Pretty simple. Tax sales, imports, but not income or assets, including houses. Tax the house, car, etc. only when bought or sold. It is not quite that simple, but this is the format I believe will work in our free society. Also, make raising ANY tax rate or application very difficult for Federal manipulation. Perhaps even require amendment-type approval. That's my story and I'm stickin' to it.

    38. Wayne Grievo says:

      Thank you for being there, Heritage………….
      Now, if we can get congress to look past their own greedy souls! Pray that we all see that the queen has no close on and stand up and vote his little lordship out of the White House next year.

    39. Greg says:

      This "New Flat Tax" sounds like "back up and punt", then continue toward the goal of being at the same place several years from now. A flat tax with all these "deductions" is still a tax on income. As time goes on, we will see more and more "deductions" implemented by congress until we are mired in the same mess that we are now.
      A much better solution is the "Fair Tax". Get rid of the tax on individual income altogether, and abolish the IRS. The "Fair Tax" would be much easier to administer and is an incentive for business.
      For those not familiar with the "Fair Tax", they should go to their web site for information.
      I think Heritage should get behind the "Fair Tax" for tax reform, not another form of income tax with hidden and complicated deductions.

    40. Elin Carlson says:

      The Fair Tax is a far better long-term solution. Please take a good look at it, especially read the FAQ. http://fairtax.org

    41. Glenn says:

      Too many subsidies..I mean exemptions, which all go to distort markets and pump up prices. To the specific ones listed: 1) A health insurance credit for low and middle income includes nearly everyone continueing the subsidies. 2) Anti poverty credit is fine similar to the FAIR TAX. 3) A higher education deduction again pumps the costs and distorts our society against blue collar workers, which in turn feeds illegal immigration. It's a lose all the way around. 4) Charity deductions are fine. A dollar given equals a dollar never made. I would suggest stricter requirments for the deductable status tho. 5) This is the ideal time to put in place a phasing out of the mortgage exemption which has like all subsidies distorted and fed inflation.

      Overall the FAIR TAX seems a much simpler approach even getting rid of the IRS. With that it is just neccesary to limit it to legal residents which adds imputus to action on border security and those here illegally.

    42. June says:

      Could we please stop talking about it and get it done. We know it is a better way but all we do is talk. Just do it.

    43. Dwain says:

      Tax credits are the work of the devil–to give to someone something they have not earned–it is not right and not conservative.
      Secondly, the business tax should be in the neighborhood of 15% not 28%.
      This proposal is a no go for me.

    44. DanK says:

      The basic idea is very attractive. The major problem is how to implement it in such a way that the rate CANNOT be changed by our elected officials in Washington.

    45. Ronald L. Weston says:

      The flat tax would still be unconstitutional:

      Read pages 11, 17, and 19 of the Brushaber v. Union Pacific R. Co., 240 U.S. 1 (1916) case, and

      "The Sixteenth Amendment, although referred to in argument. has no real bearing and may be put out of view. As pointed out in recent decisions, it does not extend the taxing power to new or excepted subjects,… "Peck V. Lowe, 247 U.S. 165, 173 (1918), and tere are many more such still standing cases.

    46. Doug Leeds says:

      I much prefer the FairTax, it eliminates filing taxes altogether, eliminates all federal payroll taxes, eliminates capital gains taxes, death taxes, corporate taxes, and gives every LEGAL citizen a monthly prebate so those with lower income actually are better off than they are now. It also collects taxes from everyone who spends money on new products in this country including foreign visitors, illegals, and criminals!

    47. John Long says:

      I am a tax preparer but I agree the tax code needs to be swept away and replaced. Your proposed New Flat Tax is better but getting to taxable income, especially for self employed is still an opportunity to be creative. I have researched The Fair Tax and I find it would be the easiest to implement, would be easy to understand and the infrastucture is in place already in most states to collect and remit to the government, plus the IRS would be repealed as a bonus. What are your ideas regarding The Fair Tax?

    48. TBMIII says:

      Should this ever be put into effect, it would be necessary, at the same time, to repeal the Constitutional amendment permitting an income tax in the first place. This old amendment was passed, as I recall, to support the World War I war effort. It would be prudent to replace the amendment in order to prevent Congress from tax twice.

    49. robert carlton says:

      I like this, very much..One question: Has anyone made a valid estimation of expected Federal revenues with this plan?

    50. Paul says:

      28% Flat Fed. tax, plus state tax, so that means us tax payers pay about 45% of our income to taxes – plus local township and school tax?

    51. Jack, USN retired says:

      And this is better than the Fair Tax how? We still have the IRS, the16th amendment, and the untaxed underground economy. I am for the Fair Tax!

    52. Arthur McLean says:

      Why not consider the "FairTax"? This would be even simpler as it replaces ALL federal taxes, including Social Security and Medicare, with a consumption or sales tax. Per the analysis by economists, the so called "stealth taxes", comprise 22% on average of the goods and services we buy today. These would be replaced by a 23% sales tax and would be revenue neutral; i.e. no need for sweeping spending cuts to implement this or significant price increases! Everyone would take home their gross pay.
      The details are in a book, titled "The FairTax", and in 2 bills before the House and Senate. This blog is not an appropriate forum for all the details, but the advantages to small businesses (the job creators) would be even greater than the flat tax. I think politicians will not consider the FairTax as it would end much of the incentive for corporate lobbying of Congress (and thus the source of campaign contributions!).
      I would like to see Heritage do a detailed analysis of the FairTax, and publish a report comparing the benefits with a flat tax and what we have today. The FairTax book was written in 2004, so the data needs to be updated.

    53. Greg Nutt says:

      Why is the human animal so afraid of simplifying??? 28% is still way over the top! A 5-10% flat rate with NO exemptions is much more reasonable and far less complicated. That means; everything, everyone, corporations, non-profits and, yes, even churches pay the same amount. I think you'll find excess funds in the coffers at the end of the year.

    54. WAYNE R MENGER says:

      I'm sorry, are you nuts with a 28% Flat Tax Rate? I'm a 30 year Tax Preparer and most people I prepare taxes for pay an "Effective Tax Rate" under 10%. If you want to get real on a flat tax, it needs to be in the 7% range on all income except savings and investment to include: welfare, food stamps, Wick and Social Security Disability. This Flat Tax would insure that everyone has "Skin in the Game" and 47% of Americans won't avoid paying any tax at all. Really, I expected more out of Heritage with all your expertise. I'm a Heritage member.

    55. Jim Reinarz says:

      Why 28% – why not 18% and everybody pays………

    56. P. Miller says:

      This is certainly NOT the answer!! 28% is too high…. and would probably be increased as time goes on.

      Right now most people are subject to 28% or less… and by keeping a number of 'deductions', it isn't really a flat tax at all. Those with certain deductions, now refeered to as 'loop holes' would continue to pay less than those who do not have such deductions.

      You say it eliminates 'income tax'… so does that mean a 'flat' 28% on ALL income, including capital gains?

      And don't you realize that there is NO such thing as 'corporate tax'? It's simply passed along to the consumer…

      I have had doubts about Heritage Foundation lately… and this one confirms my fears… you are NOT who you claim to be! This is NOT good for Americans!!!

    57. kicker51 says:

      While a flat tax is an improvement over the present system, it is not a great improvement, and falls far short of what is possible. Since the flat tax is still an income tax, it continues to penalize productivity and hard work. Since it is still an income tax, it offers lobbyists a brand new opportunity to spend billions convincing Congress to create exactly the same type of exemptions, favors, and "special deals" that the old income tax contained. Since business will still be taxed under the flat tax, it continues to impose penalties on American companies and workers that drive jobs overseas and reduce American competitiveness in the global community.

      There is a better way — The FairTax. It is not an income tax. It replaces all forms of federal income tax with a single, simple, retail sales tax that applies only to new goods and services. It untaxes American business, creates millions of new jobs, and supercharges the American economy. It also ends taxation of any kind on purchases up to the poverty level, helping the poor and middle class, and encouraging those with less to earn their way out of poverty, instead of holding them in destitution like the current income tax system.

      Under the FairTax, everyone pays the same rate on purchases, rich or poor, and, unlike the present income tax system, it taxes the underground economy, visitors to our country, illegal aliens, and the extremely wealthy who currently use high priced advisers to create "tax free" income. And because it does not tax capital, only purchases, it would allow the return of the roughly $13 trillion currently kept off-shore by business to avoid US taxation. Providing an unimaginable stimulus to the American economy.

      The FairTax ends manipulation of the tax code by Congress, returns power to the States, gives individuals more control over their financial future, stimulates the economy, and creates millions of new jobs. The flat tax is simply the same old income tax in a new package.

      To learn more about the FairTax, visit http://www.ohfairtax.org and help put an end to a hundred years of income tax misery.

    58. Floyd says:

      It started out simple, then added discount for poor, discount for school, discount for interest payment, discount for medical, , , Sounds like something that would grow quickly to be the same as what we have. Why do you need all these discounts? Once you open a gate for these kind of things new ones will crop up. /fw

    59. Uncle John says:

      Taxing income is taxing work and effort. The Founders knew this was conter productive, and the Constitution needed to ba amended to institue a federal tax on work and effort. If we are going to drastically change the tax code it seems that taxing consumption is morally superior to taxing work. The wealthy will generally spend more and thus pay more, by choice. One has a choice to spend one's money on unnecessary items. However, for most of us work is a necessity, and a substantial part of our work is forcibly confiscated by the government. It is a form of slavery to be forced to work a day a week or more for the government. Spending, on the other hand, is an option except for food, clothing and shelter. Another form of slavery in this income tax system is the effort required of employers to withhold taxes for the government with no compensation for their effort. I say tax consumption and allow sellers to keep a smalll percentage of the tax collected to compensate them for their services to the government.

    60. Missy says:

      28%. I don't think so. God only asks 10%, the govt. should be happy with a 10% flat tax and stop spending so much, live within those means!

    61. Jim Campbell says:

      If I'm taxed at a flat 28%, I would have to give them over $53,000 and I currently pay around $36,000. A flat tax is a good idea, but 28% is way too high.

    62. Roy says:

      I wonder about about a $3500 health insurance policy…..shop for any of those lately?!
      Let's close some loopholes and really encourage savings

    63. jcb322000 says:

      The proposed tax on business appears to be a tax on business activity instead of a tak on business profits. Low profit businesses will get killed under this proposal!

    64. Joy Lowrance says:

      28% is too high. Joy

    65. Stan says:

      I thought we wanted a smaller government.
      A max of 10 % with NO deductions.
      And all other federal tax would be gone, tax on tires, gas, booze, luxury tax on cars, I'm sure there are many more.

    66. Matt Mattski says:

      There y'all go again, over thinking the problem. You bureaucratic types just can't help yourselves, what y'all are suggesting is little more than a "tinkered with" current tax code mentality. Keep it simple stupid!
      Basing calculations on gross income (no deductions whatsoever), individuals at the poverty level should pay no income tax. All individuals with an income (no couples reporting jointly) sould pay twenty-five percent on all gross income, regardless of the source, whether from capital gain investment, pension benefits, IRA's or annuities (existing pre-taxed annuities or IRA's, etc would be exempt). unemployment benefits (if above the poverty level) should be taxed at only half the standard tax rate or at 12-1/2%.

      The above suggestions are an example of trying to keep it simple.

    67. Robert says:

      28% is outrageous especially for seniors: My effective rate is currently 9.5% marginal rate is 15%. I think you should go back and reevaluate your plan.

    68. Thomas Laur Sr says:

      HR 25/S 13 "Fair Tax" is abetter propasal. Tax consumption ( a much broader base) and do not tax income. 23% on new goods and services beats 28% on income. Check it out at http://www.fairtax.org

    69. clarence swinney says:


      BUDGET IS 3800B–IT TAKES 32% (no deductions)TO COVER IT

      Swinney KISS method–this will work–It is Fair
      Progressive Flat Tax–burn tax book–that gets addiitonal 2000B + of revenue and balances our budget

      A Flat 28%–Richest 400 yell Wow Wonderful. We get a 65% Tax Increase. Wow!
      Yes Amigo 65%. Paid 17% and go to 28% is 65% increase.

      Warren Buffet so happy. Paid 10% effective on 63M income on 2010 tax return now can pay 28%. He proposes a higher tax on his income. He will get it,.

      Two Key Numbers to remember–
      Total National Income is 12,000B (rounded)
      Total consumer spending is 10,000B
      Cain 9-9-9 was so dumb it amazed me how it was even discussed
      Total taxable was 22,000B—9% is 1,980 our one half our 3800 budget
      How could that be dscussed? Is we learning ?

    70. ThomNJ says:

      Sorry Heritage – I would not back your plan. As a few have already said, this is how we got to where we are at now. You have a very high rate, you include entitlements and you have deductions. And why would I want to pay more? I already pay a heck of a lot – your plan would just boost me a bit higher – thanks but no thanks.

    71. Steve says:

      So if I understand correctly you still want some deductions, some exceptions, some variances, etc. and worse yet, the IRS and the Fed to control. I don't know about everyone else but I am all for reform but make it simple. No deductions, no exceptions, no variances! Most states have a sales tax system. Use it. In most cases it is already there. I am much in favor of a sales tax for the Federal Taxes. You pay a % on EVERTHING you purchase. Yes everything! Do away with deductions, exemptions, and all other forms to be able to manipulate your tax base by income, race, country of origin, veteran status, education level, home value and mortgage interest etc… If you purchase anything, it will come with a tax on the sale that will pay for our Federal Government. The more expensive you buy, the more tax you pay. This goes for companies as well.

    72. Gene says:

      Just a gutless shell game. Look 28% flat tax. Is another way to tell middle class we're gonna take your mortgage interest & property tax deduction sure we'll tell you we'll include dependent deductions ha we'll tell you anything. You want a flat Tax how about 33% on Gross unmanipulated income only if you earn over
      $150,000 a year earn less no taxes. If you haven't served in the military 70% tax on your gross. Nobody rides for nothing.

    73. Thomas Laur Sr says:

      HR 25/S 13 Fair Tax unencumbers business, evens the playing field on exports and imports. Does away with loopholes, no deductions to reward/penalize individuals or businesses. lobbiests can get a real job.

    74. Nonidiot says:

      28% … of WHAT? The people that will be hurt most by this are those who earn less than 100,000 a year and those living on a fixed income. Most people who earn up to $50,000 a year pay far less than 10% now! You want to raise that to 25%? Look, the tax code won't change because only ONE page of it deals with "rates" – the rest of it is how to calculate "income" – and it takes that many pages to define it. Also, the writer is wrong to say that the tax code discourages savings and investment. Capital Gains and Qualified dividends are – for most people – tax free. The rate most people pay on investment returns is ZERO percent.

    75. johninohio says:

      I'm unaware of any reference to a flat tax under Reagan. Tax rate reductions, yes–but no flat tax.

      The problem with a national sales tax is that it will incentivise off the books transactions, black markets (another form of off the books transactions) and outright criminality with hijacking of products in transit to feed the black markets.

      One advantage of a simplified income tax code that also reduces the burden and uncertainty on business is that any improvement in the economy resulting from such a tax code revision will lead to increased employment (more tax revenues) and increased individual incomes (compensating for any net increase in income tax over what is currently being paid).

    76. Violet says:

      I want a guarantee that the rate will stay the same. Given the nature of our Federal Government the year after it is implemented they will deem it not enough and raise it only a tiny percent more. Then next thing you know they will be legally taxing you at 75 or 80 percent and that will not be enough.

    77. George says:

      Thanks for offering to raise my taxes!

    78. Benjamin says:

      28% is an obsurd amount Americans certainly do not deserve to give up. I agree with a flat tax but spending is the problem, not taxation. If we issue a flat tax that will support 12 – 15% GDP spending with a goal to limit that even lower (perhaps 7 – 10%), along with spending limitations that include removal of ALL bureaucratic departments that limit our economic growth, earmark spending, and Bills which have items not intended for the proposed use of the Bill (ie. school loans wrapped into ObamaCare).

    79. Sam Collier says:

      The Fair Tax is much better. I cannot understand why the Heritage Fdn cannot get behind repealling the 16h amendment and totally eliminating the income tax. The Fair Tax is far simpler: fair to the poor since they get prebates; everyone else pays, including the crooks; and our economy would skyrocket with no corporate income taxes to retard our competitiveness world-wide. Support the Fair Tax.

    80. Jeff Dover says:

      This looks great…and what the government wants/needs isn't an issue. If they've got $500 million to hand over to Solyndra, for nothing in return, and a budget of $30 billion (2012 request) for the Dept. of Energy (can anyone say how that dept. has made their lives better…ever?) then what they get isn't an issue.

      Let's get to our congressmen and make sure this becomes the law.

    81. Charles says:

      I am disappointed that Heritage would publish this! It is not well thought out and would raise taxes on most people. Please explore the "Fair Tax" which is the way we should go.

    82. jrcowboy49 says:

      This is not a simple flat tax. The rate in my opinon needs to be between 15% and 20% with no deductions. The rate would eliminate all federal taxes including social security, medicare, and medicade. All taxpayers pay something with those below the poverty line receiving some tax credit. Eliminate the IRS and tax form is a post card or electronic submission.

    83. Tina Bogani says:

      28%???!! 28%!!!? Under the old rules of conventional lending, that was how much I was allowed to spend FOR A HOUSE! I like the idea of a flat tax, but the rate would have to be WAY less to make this an attractive option. Also, in the game of economics, when providing an INCENTIVE to one group, you PENALIZE another – why would we want to keep seniors in the workforce longer? What would that do to workers just entering the workforce?

      I'm still a big fan of taxing consumption instead of production. Fair tax me instead!

    84. Bob Raymond says:

      Please start over. You are just tinkering with a "tax on income" system.
      Haven't we seen the miserable results of the income tax system over the ninety eight years since it's inception? The Sixteenth Ammendment must be overturned.
      Let's have a serious discussion of a flat rate sales tax , constitutionally limited to say 10%, on all new purchases save food and medicine. (I understand that may leave open arguments as to what is food etc.)

      Zero tax on corporate income. Zero. Coprorations do not pay taxes…people pay taxes. Corps would pay tax only on stuff they buy.

      You say a 10% sales tax would not be revenue neutral. GOOD. Along with a balanced budget ammendment prohibiting borrowing (with national emergency exceptions requiring, say, a three fourths majority vote by Congress), this income limitation would force the government to spend only on its "enumerated powers." What a concept.

      That's my bid.

    85. glynnda says:

      28%?????? Do they want my right arm too? How about my kids, I could sell them into slavery……

      That is a ridiculous amount…….First there should be NO INCOME TAX!!!! Taxes paid should be decided upon by the person paying i.e. the Fairtax. People will choose when they will be taxed because they are only taxed when the purchase a New item. Those items necessary to life such as food, medication, etc receive a "pre-bate" which means all tax dollars spent are reimbursed to the citizen…..

      The 16th amendment should be repealed. The government should be forced by Constitutional requirement to balance their budget annually, and actually create a budget for that matter…..and if they don't they lose their pay (at least one month's salary), after 30 days of tardiness they each receive a fine, after 90 days of tardiness the government gets shut down except for critical services and Congress cannot vote on or even discuss another piece of legislation until a budget is passed and balanced.

      Enough now!!! Can't these people be held responsible for anything they do????


    86. glynnda says:


    87. glynnda says:

      Heritage, I almost always agree with you, but not this time, you are way off the mark……

      So if I make 100,000 I pay 28,000 in taxes? ……Beyond ridiculous……….

    88. Ken Kempel says:

      There is no doubt that the current tax code needs to be discarded and replaced by a much simpler, fairer, and transparent tax code. The only plan that I have read that does this is the Fair Tax. It resolves the objections raised in the comments above and much more. If an estimated 10.5 percent increase in the GDP in the first year alone, raising the economy’s capital stock by 42 percent, its labor supply by 4 percent, its output by 12 percent, and its real wage rate by 8 percent interests you then go to FairTax.org to learn about it. If you agree that this is the best way to go for the USA, then become a supporter and start spreading the "good news" and encouraging others do the same. American history is the story of "We the people" taking on difficult tasks against impossible odds and accomplishing the goal. The Fair Tax can become a reality, but only with your help and support..

    89. NJConservative says:

      Wow. This is the worst idea I've seen coming out of Heritage since the individual mandate. A "flat tax" that with all the credits, deductions and other BS is not flat whatsoever. This plan still uses the tax code as a vehicle, not for raising the revenue the government needs to perform its constitutional duties, but to manipulate people's behavior. At the same time it still props up the failed SSI and Medicare entitlements. We should be striving to replace these failed programs with tru, market-based approaches not perpetuating them. The tax code should respect property rights and promote economic freedom, not be used to have some Americans subsidize others. This might be simpler and fairer but that does not make it right.

    90. Carolyn Grow says:

      28 % flat tax, even with the mentioned deductions, is way too high a rate. I am 71 years old on fixed income. One of my sons´ families has 6 children and he earns a moderate income. 28% tax is outrageous!

    91. Judith Kassel says:

      How will flat tax cut my Per Propty & Real Estate Tax Bills due Dec 31st? __Cty REAL Est.: St of __ $10, CtyHealthFund $47, CtyParkMaint $17, CtyBondRetire $10, Road/Bridge $35, CommCollege $74. SpecSchoolDist $342, MetZoo/MusDist $90, CtyLib $55.09, LocalSchDist $1,508.49, SewerDist $6.25, FireDist $223.42, ShelteredWorkshop 28.39, CtyGeneral $68, Spec.Assess. $28.00 +

      __CtyPERSONALPropTax has TAX $ for "every" item listed above, also! TOTAL: $2700.00+beforeFEDIncTax. ____cut as FedIncDed! Citizens fortunate enough to have HomeMortg & raising children should NOT be penalized with Fed tax reform that cuts Mortg. interests, Read phone/IP bills with excise taxes & user fees, etc., etc.!

    92. Judith Kassel says:

      Read phone/IP bills with excise taxes & user fees, etc., etc.!__Auto industry nose dived when autoloan interests were cut as FedIncDed! Citizens fortunate enough to have HomeMortg & raising children should NOT be penalized with Fed tax reform that cuts Mortg. interests, personal property& real estate taxes, DEPENDENTS deductions, MedicaI/Ins&Care! __Congress' "entitlements" – pay, healthcare, paid vacation days, travel expenses, RETIREMENT pay for LIFE more 4X's non-public plans. changed.

      FlatTax & FairTax Plans did NOT worked in England. Higher local taxes were levied to pay rising local labor, maintence, fuel, fire/police, city streets/lights etc., etc.! ____Cut Fed Corp/SmBusinessTax, Regulations, & ObamaCare! States & local residents can begin to recover, survive, and eventually THRIVE, again. JK

    93. Carolyn Grow says:

      A Fair Tax is the way to go, and no income tax.

    94. Glenn says:

      The FAIRTAX is still a better system. With the Fair tax, everyone pays their share everyone, with no exceptions, and no monkey business with the deductions for this and that. The FAIRTAX, plain and simple, pay it when you consume, and don't pay when you don't. Fairtax.org. The fair tax is still the best, and I am very surprised to see the Heritage Foundation not promoting the best there is to offer. Shame on you!!!!!!!!!!!

    95. Jack Sossoman says:

      This tax would be insidious to seniors who are on Social Security with little or no additional retirement income and cannot work because of age or health. You are going to tax 28% of what they spend when most of what they spend are for the necessities of life?? I paid into Social Security 40 years and Medicare since it's inception. This will break most seniors and send them into complete poverty! It is unbelievable that you would put forth this idea. Incidentally, I have no problem with the "Fair Tax", since no taxes are paid to the poverty level for anyone.

    96. Michael F Douglas says:

      How about a "fair" tax only.Items you purchase you pay a tax on.Zero income tax for individuals & zero taxes on businesses.Plus get rid of the EPA so that jobs will come back to this country!

    97. America1 says:

      Even simpler, implement the Fair Tax!

    98. Stanley Allen says:

      Both the Flat Tax and the Fair Tax impose a rate determined by Congress. Neither guarantees a stable rate. Both provide relief for low-income families. However, the Flat Tax gives money to those who have paid nothing, but the Fair Tax returns a portion of what hs actually been paid. The Fair Tax lets the taxpayer control the amount of tax paid by controlling purchases. It also eliminates the monstrous bureaucratic IRS, which operates on the principle of "guilty until proven innocent", contrary to the accepted principle of "innocent until proven guilty". It is almost impossible to "prove" innocence. The IRS must be eliminated. Heritage needs to re-think their approach to tax policies and principles.

    99. Heritage needs to get on board with the FairTax. http://www.fairtax.org This plan – which Herman Cain supported initially, and actually still does – is VASTLY superior to a flat tax. Go to the web site and see for yourself. For even more excellent information on this – read Neal Boortz and John Linder's books: The Fairtax Book, and Fairtax: The Truth. THE FLAT TAX -EVEN IN THE FORM SUPPORTED BY HERITAGE – IS VASTLY INFERIOR TO ELIMINATING THE TAX CODE AND THE IRS, AND REPLACING ALL PAYROLL TAXATION WITH THE FAIRTAX. IT IS NOT A VALUE-ADDED TAX. CHECK IT OUT.

    100. Bob Jourdan says:

      This 28% is downright outrageous! And this seems to continue deductions that will be manipulated by every politician in Washington. This extreme 28% looks like it is designed to allow the continuation of most government agencies, departments, give-away programs, etc. And it still allows certain people to not pay anything!

      A national sales tax covers everyone who spends money, and would be much more equatable for all. I can't believe Heritage would make this 28% recommendation…!!

    101. Damon says:

      As a retired Senior, this would increase my taxes by almost 20%. I cannot support that, although I think a flat tax is a good idea. The idea needs some more work.

    102. Jim Buzzell says:

      How do we get rid of all the soical engineering which this plan still includes as a mandate from government to continue to order our lives; why not reduce the rate to 15% and eliminate all federal mandates period; why does the federal government need to dictate our lives, and how we choose to live our lives.

      Along with lowering the tax rate lets talk about abolishing those requlatory agencies which interfer in the orderly free enterprise system we choose to live under?

    103. natch says:

      Your flat tax is a crock. How can you provide for targeted benefits, such as the mortgage interest deduction, and call it a flat tax? Why should I help pay for my neighbor's house? Give me a break.

    104. Dennis Wharton says:

      I would first like to thank Heritage for the good work that you all do.
      My statement on the "Flat Tax" is how can we as a "Free People" tell our children that we are "Free" when we allow our government of which we created to take our money at the point of a gun!! Why aren't you at Heritage working on a system which would eliminate all taxation so that we might be "Free" from compulsion which is the prerequiset of a "Free People"! I know that there are systems out there which have been devised for our people to pay their own way and still get the services that they expect from our govenment. This so called "Flat Tax" will do the same damage to our economy as the Income Tax has when Congress figures out how to continually raise the tax rate to obtain more revenue. We need a pay as you go system and not a mandated tax system that enslaves our people to the already overreaching government. If you would like to know of one of these systems you may contact me at the email I have given you.
      Thank you for your concideration.

    105. Phil says:

      What we need is a much simpler national sales tax with an absolute maximum of fourteen percent across the board. Added to that would be tariffs and import taxes to make up for the jobs lost overseas; which was the original intent of the Founding Fathers. Ideally, if it were Constitutionally possible, the sales tax would operate at the lowest, most local taxing authority. This means the citizen pays his fourteen percent when he buys something. That money is then collected by the town, city, or county. Then the county bureaucrats go after the local bureaucrats for their fourteen percent cut. Then the state bureaucrats beat up the county bureaucrats for their cut. Then the feds go after the state bureaucrats for their final fourteen percent cut. No paperwork for the individual citizen which makes the the citizen free.

    106. Matt - PA says:

      From The New Flat Tax—Easy as One, Two, Three (sent out after my 1st post): "A rate of 28 percent is comparable to or significantly below the typical rate facing an individual or family today. A working family today is subject to a 15.3 percent payroll tax rate, plus either a 15 percent or 25 percent individual income tax rate, for a combined rate of 30.3 percent or 35.3 percent."

      I'm not a tax lawyer, but I thought that tax rates were progressive — someone in the 25% bracket does not pay any where near 25% federal tax! Then there are deductions, exemptions, so even lower rate. And the payroll taxes are the rate stated when adding both employer and employee contributions — a bold assumption that employers would fully give their contribution in full to the employee (wouldn't they rather consider hiring or not firing employees in this wonderful economy) — and even if they did — boom, that would be hit with a 28% tax.

      And what is the point if revenue neutral — why bother if not cutting rates to both stimulate the economy and also force reduced federal spending. And without making this a Constitutional amendment, to easy for a Demo/RINO Congress to just increase the rate, make out more cut-outs for the "99%" (who are really the 50% who don't pay taxes anyway). How do they think income taxes started out — very small and simple. We know how that went…

      Reconsidering my Young Presidents Club level of membership — advocating tax increases, and using my $ to come up with this idea!

    107. Robert Croach says:

      While I would accept this as a starting point, this does NOT do as much good as the FAIR TAX. I will remain an advocate of the FAIR TAX since it does away with all payroll taxes, SS Taxes, Corportate Taxes, makes honest men and women out of those who currently pay no taxes, and, provides more tax revenue than we currently pay in. Also, as a result of doing away with Corporate Taxes, many US companies would bring all of their production, help desks and support structures back to the US – Once again the US would be on a competitively advantaged basis vis a vis the rest fo the industrialized world.
      Additionally, it does away with Federal Sales tax on anything used being sold, i.e. cars, houses, etc.; a huge chunk of the IRS (everyones favorite bureaucracy); and half a billion dollars/year in time and assets spent filing taxes.
      Unfortunately, because it destroys a great deal of the power base in Congress (enabling favors for specific communities and ultimately kickbacks) it has little chance of ever becoming a reality.
      This is the ONLY "hope and change" for which I will continue to fight.

    108. jcpickard527 says:

      You call that a flat tax 28% is what I pay now! does me no good! 28% is foolish and unrealistic! You people have been on the freeby dole for too long cut your expected expences by 73% immediatly and then settle for 10%. Declare worldwide Bankruptsy and tell the Chinese so sorry. Cut off all foreign aid until you have fixed us!

    109. rocksandbroncs says:

      Although a flat tax is far better than what we have, I still prefer a consumption tax. Taxing a person's income is antithetical to conservative principles. And a consumption tax is less progressive regressive than our current income tax. As long as the consumption tax is a replacement for and not in addition to our current tax system.

    110. Rick says:

      Study the FairTax FAQ section to understand why it is the ONLY solution to true prosperity in America. http://www.fairtax.org/site/PageServer?pagename=a

    111. Brad460 says:

      Very, very bad idea. I'm surprised this is coming from Heritage. The noting of taxing someone's labor, exchanged for income is wrong. Why is ANY government entitled to the fruits of my labor. A much, much better idea is a flat national sales tax. Not only is it voluntary since you decide what your purchase, but it's fair and applies to all, applies to everyone equally, is simple, and does not discourage work and investment. Come on Heritage, figure it out! When someone is entitled to even a part of the fruits of your labor, your a servant!

    112. Gem says:

      This is the first time I have ever found a Heritage proposal to be so flawed, making assertions that simply are not true. A 28% flat tax rate? Another reader noted that it seems high; it is worse than that – it IS too high.
      Retirees in middle class would be most drastically abused: living off dividend/interest income which is less than their wages, then being forced to turn over 28% of that lesser amount is neither "fair" or "better". Worse, the dividend income is derived from savings that were ALREADY TAXED.
      My opinion is the government should manage on 15% of income – that is sufficient to cover what NEEDS to be done.
      If fiscal conservatives – from any party – could take control of Congress, perhaps appropriate spending cuts in everything unnecessary could begin, and we would restore the USA to financial sanity.

    113. D Wilson says:

      How wonderful it would be to think something like this could ever be implemented but… I am afraid that it will never happen as those on both sides of the aisle would see money disappear out of their own pockets and THAT would be the end of that discussion! But it is still nice to think it could actually happen.

    114. Allen Finkenaur says:

      I was in the tax business for over 40 years so I know how the flat tax will work. I am very much against it because it is a bad tax for low income people and it is much to easy for the Congress to "adjust " it up a little i the future without people ever knowing what is happening.

    115. Flm Sr. says:

      You are on the right track with a Flat Tax but you could not be more wrong headed in my opinon whit what you are proposing. We do not need a Flat 28% income TAX with a bunch of deductions and tax credits! There is no constitutional authority for the federal government to pay for people's medical billsor to tell people when to retire nor how much they will have to live on when they retire. The nation's GDP was $14 Trillion not long ago. The FED needs X dollars to properly preform it's constitutional authorized functions. A flat ($X/$GDP)% of Gross Business Incom with no decuctions is the only Taxing authority needed at the FED level. Everyone pays that TAX when they buy The goods and services produced therefore no citizen has any dealing with FED bauracrates. As the GDP grows FED income rises an as GDP falls FED income falls therefore growing GDP becomes a a FED priority. States are very capable of handling all other social enginering this nation of freedom needs.

    116. Blair Franconia, NH says:

      Sounds good but Herman Cain's 9-9-9 plan was better.

    117. Mike, NC says:

      The Heritage Foundation's "New Flat Tax" should to be called "(Heritage's) New/Old Convoluted Tax Code-Lite". Why? Because reading and thinking reveals that not only did the Federal Income Tax Code also start with relatively few "exemptions", which of course, despite any claims that such wouldn't happen, were followed by more after that, but now also while, similar to other grandiose presentations, Heritage's so-called "New Flat Tax" is presented as being (quote) "as simple as one, two, three", the presenters then proceed with a few convoluting social engineering "tax credits", etc., just less than there are now, i.e. a "New/Old Convoluted Tax Code-Lite". A Flat Tax is such as 10%, period, not "28% except for 'tax credits'".

    118. bob dietrich says:

      i would rather have the fair tax. a simple national sales tax. no exemptions, no credits.

    119. wallyblu says:

      In the first paragraph you repeated what is wrong with the present tax law, you proposed loop holes.

    120. P. R. Callihan says:

      The flat tax again is a no go. Too much on low income , too little on those who have the most. It was a bad idea back in the 1990s and there is no change. Yes, the tax code needs revision, but the flat tax is a bad idea that won't die. I am an accountant and keeping up with the code is challenging to say the least, a progressive income tax based on a more simple earnings, deductions and credits is far better. A lot of the 16,000 plus changes since the TRA of 1986 were for political gain. Who wants to give up the child credit? The education deduction or credit? Itemized deductions like mortgage interest or state and local taxes? Flat tax was wrong then and wrong now.

    121. Dean Gulling says:

      The best deal is a flat tax with no deductions…..need to use the "KISS" formula. File on a folded postcard.
      Eliminate the middle bureaucrats ….

    122. John Gaver says:

      Let's see. The current tax abomination began it's life as a Flat INCOME Tax. So what's to make us believe that a new Flat INCOME Tax will remain flat beyond the next session of Congress. One look at the names of those in Congress will convince even the most jaded observer that the rate won't remain flat.

      One of the primary problems with our current abomination is that, being a tax on INCOME, it drags down the economy, by punishing productivity and savings. Making a tax on INCOME flat, will not make it any less of a drag on the economy or stimulate savings.

      Yet another serious problem with our current abomination is that it has layer upon layer of hidden taxes, of which most people are not aware. These hidden taxes come in the form of corporate taxes that are embedded in the cost of every new product. This of course drags the economy down even more and amounts to double taxation, since consumers would be buying already taxed products, with after-tax money. Making the Corporate INCOME Tax the same level as the Personal Income Tax will do nothing to eliminate the many layers of hidden taxes, which constitute double-taxation.

      The whole idea of a Flat INCOME Tax is nothing more or less than a placebo. It will NOT solve any problems, but only mask the existing problems for a little while longer.

      By contrast, the FairTax will be entirely transparent and will eliminate all double-taxation. It will stimulate the economy, by removing the drag on the economy that ALL INCOME taxes create. But beyond that, it will encourage savings. But above all, unlike INCOME taxes, since it would be entirely transparent, raising the rate of the FairTax would be political suicide.

      A Flat INCOME Tax of any kind is a non-starter, since flattening the rates would be analogous to re-arranging the deck chairs on the Titanic. The root problems would still exist. The FairTax is the only tax plan being discussed that would actually FIX the problems with our current tax system.

    123. Mike, Hickory, NC says:

      Warren…A flat tax is by definition, in fact, and actual pure application accordingly a single, flat tax rate for everyone, regardless of income, and so no, a "flat tax" was NOT tried while Ronald Reagan was President.

      In fact, since the "Progressives" sold and imposed their "Progressive" Federal Income Tax Code (which divides the people into "income tax brackets" and imposes progressively higher taxes on each higher "bracket") during the 20th Century, a "flat tax" has not been tried, even as a "flat tax" by that and any other name including "tithe" has been tried, and in fact has worked and continues to work for levels of government and other institutions and groups of people, some of them among the most powerful and influential in the world, and this has been demonstrated as true for hundreds, even thousands of years…Actually, really, check your facts and history on your own, if you dare, and you will find all of this is true.

    124. Richard C. says:

      I am a retired senior. Sounds like I would be paying more on:
      a) My pension
      b) My mandatory annual withdrawal from my IRA.
      c) My Social Security (?)

    125. C R says:

      Seems to me retired seniors who do not have payroll taxes or home mortgages anymore would see a substantial increase in federal taxes under a 28% flat tax system.

    126. M Hegedus says:

      Flat tax sounds like a great idea, but no government has the right to tax at 28%. The money belongs to the people the government exists to serve, not the other way around. A legitimate rate would be 10% and would require a lot of disciplined cuts in wasted spending. It would be interesting to see how innovative & generous the American people could be with 90% of their income to spend as they wished. The need for government programs would decline significantly.

    127. Herbert J. Baumann says:

      You perpetutate the same system that we have now. We need a TOTALLY flat tax, with NO deductions, NO exemptions and NO exceptions. EVERYONE pays the SAME percentage, no matter how much they make. No exemptions for kids, house, charity, etc. Keep it absolutely free from special interests of ANY and ALL kind.

    128. Jim Galbreath says:

      The New Flat Tax is still an income tax and we still have the IRS. Go with the FairTax and eliminate the IRS and fund Social Security and Medicare from this sales tax.

    129. FalconFlight says:

      And my guarantee that the rates won't be increased is where?

    130. Chris says:

      This still doesn't account for all the hidden taxes disguised as fees. Take a look at your phone bill. The fiancial regulatory burdens are just as onerous as the income tax code.

    131. Kathy B says:

      On the business tax side, i don't quite understand. If the busines is taxes on net cash flow, how can you say that finxed assets would be fully deductible in the year of purchase? How many major fixed assets are paid for in cash? Aren't they usually financed?

    132. Doc says:

      Anti-poverty tax credit???? I guess you have to get lib votes somehow….but jeeze! That kind of thinking got us to where we are today.

    133. Paul Lapp says:

      Its to easy……only problem left is to the idiots in Washington on board
      Good Luck

    134. William Dixon says:

      It does not address the underground economy ( 1 trillion dollars), failure to report income and outright cheating. It still allows congress to make changes to buy favors and money from special interests. And raise rates with a majority vote.

    135. Juan Martinez says:

      9-9-9 ?

    136. Laura McCue says:

      I support the FairTax. There is nothing exciting or good about the Flat Tax for American citizens. Give us the power to control our own tax spending and you will have a stronger America and happier citizens. You know that the Flat Tax is all about class warfare and satisfying the different classes while still leaving the politicians in power and a ridiculous necessity for all Americans and businesses to keep track of expenses they can deduct. Come on. The Heritage Foundation should be better than that.

    137. Frank Goffena says:

      A flat tax will eventually morph into what we have now. The FairTax is the the only fair means of taxation! Give up the flat tax idea Heritage!

    138. David Creighton says:

      I'm retired, and though we're in the middle income, why would I want to pay an additional 15% to the Federal Government. In addition to the Feds., I have to pay the state another 10%, plus almost 10% sales tax. Most of our money is spent on things we buy, so that adds up to quite a bit. Then, there property tax, and so many other hidden taxes I can't enumerate all of them. Based on your flat tax, we would be paying more 50% of our income in taxes.


    139. David Creighton says:

      Let's cut big government first. Make Congress a part time job (they aren't getting anything done anyway) with no retirement, the same health care as everyone else. They don't set their pay. We do. Adopt Paul Ryan's new plan for Soc. Security and Medicare. Pass a constitutional amendment requiring a balanced budget, and a plan to pay down the national debt. I could go on and on, but by now you should be getting the idea. What the Hell are Czars? Why do we have them? This isn't 18th century Russia. Get rid of all of them right away. Also, the Department of Education. Much of DEA, a lot of TSA (It's been passengers on the plane who have deterred the terrorists). Cut back regulations byn 80%. Go through the laws and rescind those that aren't necessary before we allow Congress to pass any new ones. Our governments are so screwed up with waste and unnecessary personel, you would think we're al idiots. We have 17 spy agencies. Surely, we could get by with five or six. The more I think about Washington and Sacramento, the angrier I get

    140. Dave says:

      The tax rate should be no higher than 15%. The gov't needs to be starved a little.

    141. Robert Jentzsch says:

      I appreciate the work that went into this idea, but it still leaves the IRS in charge and the rate is too high. I agree with those who look forward to enactment of the Fair Tax, but at a percentage rate in the low teens. As explained by Neal Boortz, the advantages seem entirely possible and highly likely. States might need to be incentivized not to take unfair advantage. That said, Boortz'es idea of sending refunds to consumers for subsistence expenditures seems a bit clumsy and expensive. However,, I would still favor the Fair Tax over any flat tax. Those who revel in "soaking the rich" can take comfort that it is happening to them because of their greater purchasing power – while the rest of us can revel in lower product prices once today's hidden taxes have been eliminated. And, no more IRS!

    142. Dennis Witkop says:

      I am a retired 70 year old and with all deductions my marginal tax rate is currently 15 %. included in my income are social security, pensions, ira distributions and investment income. why would I want to raise it to 28%. Did you consider the fair tax as an alternative.

    143. Larry says:

      A flat tax is only a partial solution. The real problem is that only the folks that receive pay checks pay taxes on their total income. Way too many people can hide income either by not reporting it at all or expensing as a business expense what the rest of us buy with after tax dollars i.e. a farmer putting gas in his cars that are used by the family.

      In order to solve the overall problem we need something other than an income tax as income is a derived thing and will always be manipulated. A small sales tax or a head tax eliminate much of what is wrong with the tax system.

    144. H. Austin says:

      I fail to see how people receiving only Social Security enter into this. We are unfairly now being taxed on our S.S. income thanks to Bill Clinton.

    145. John L says:

      A reasonable flat rate with no deductions, credits or exemptions makes sense to me. But how would you get this past all the accounts and tax preparer lobbyists?

    146. RogerConklin says:

      _ _It state "Under the New Flat Tax, American taxpayers will pay …" My_question: would the Flat Tax perpetuate taxation on the basis of citizenship_or adopt the territorial tax policy of the rest of the civilized world? US_citizens abroad are double taxed by both their host countries and then again_by the US. A partial earned income exclusion and foreign tax credits may_mitigate double taxation, but other tax systems are so different from ours_that the mitigation is minimal. Some other countries have no or low income_tax but raise revenues through VAT, sales, net worth, personal property,_wealth and other taxes unknown here. None of these reduce the US tax. ____But even if you owe no US tax, failure to file or errors judged deliberate_by the IRS subject you to a $10,000 penalty. And you had better use_expensive qualified professional help to file. Many professionals say away_from providing this help because they can be judged responsible for errors_and subjected to stiff fines as well. The US is only industrialized nation_with a massive job killing trade deficit. Double taxation makes US citizens_non-competitive for deployment abroad. Implemented in 1976, it destroyed US_domination of the export market.._ _

    147. George R. says:

      This appears to be the worst tax plan I have ever seen. Perhaps with a better explanation, I might find something worthy. But your introduction is woefully inadequate, and the more detailed description sounds awfully like social engineering.

      I am always suspicious of the “earned income” tax credit. Does this mean that we will continue to have large numbers of VOTERS who are NOT TAXPAYERS? That is a fundamental problem that we face now under the current tax code.

      Retired people will be paying social security while they are receiving social security. Yes, I see the exemptions, but afterwards your plan taxes at 28%. Hence, the rest of one’s income would be taxed to pay social security. That is a monumental change in the system and it would hit people who have planned well and are now retired. What is this an income leveling strategy? Ridiculous!

      The plan maintains tax deductions which will expand, expand, and expand. The idea of reform should be move people to a system where all pay taxes at a level rate and make their spending decisions independent of the tax code. Let’s have freedom from governmental incentives.

      I am very disappointed in Heritage. You are out in left field.

    148. frank says:

      I have supported a flat tax rate for over 30 years but 28% is too high. We can simplify the code but it won't be with a flat tax period, it needs additional provisions. Mr Foster hasn't explored all the problems that a flat tax would create while assuming to correct the existing code. We've made a mess and a quick stroke fix will not resolve this issue. The wealthy have been the beneficiaries of the past 30 years, let's not put it on the backs of the middle class to pay the whole bill while we still have a middle class. It seems you academic types like to level the playing field after the fact and limit anyone else to achieve the lofty perch of the wealthy. Why not make the field even and allow hard work to be rewarding not a punishment.

    149. SAMUEL G. BUSADA says:


    150. 2DOkie says:

      The evils of the present system are innumerable,but it has evidently never occurred to anyone in Washington to consider improving it. Falling right after the holidays and in midwinter, when most of the population is under health stress is absolutely the dumbest time to require anything of the people.There will never be any equity or honesty in the system until we go to a national sales tax ONLY!! But that would deny the politicians the power to manipulate.

    151. Ed Foster says:

      Well, this ends my support of The Heritage Foundation. Stupid beyond believe and absolutely deadly to anyone who is retired living on Social Security and modest investment income. Payroll Taxes that fund Social Security are taken from after-tax income and should not and were not to have been taxed again. Bad enough that the government now taxes a portion of one's SS income (depending on income level), but this idiotic plan taxes the entire SS payout at 28%! Talk about touble taxation! Get real! Dividends and capital gains should not be double taxed but according to The Heritage Foundation plan described above, they will be … and not at 10% or 15%, but at 28%. What point is there in saving for your retirement if this is how you're going to get hit? Did anyone think this plan through? Destroys my faith in The Heritage Foundation. I guess I'll have to find me another conservative "think tank"; this one "thunks."

    152. Jim Thompson says:

      People opposed to the FAIR TAX haven't been exposed to it. (A brief explanation)… All (citizens) families would receive a monthly allowance based on the number of family members. All federal taxes including hidden taxes… and the IRS are eliminated…gone, then a national retail sales tax on goods that would generate revenue for the Federal treasury. Our net price for goods would be equal to or less than we pay under the current system. So, the more goods you buy, the more you contribute to fund our Federal Government. Simple and FAIR. As you can afford to buy more…you pay more taxes.

    153. Carolyn says:

      Yep, 28% is a no go as far as I'm concerned. I am with Christian First and no entitlements.

    154. Larry W says:

      The 16th Amendment will soon be 100 years old. The 18th Amendment lasted less than 10 years; proving REPEAL IS POSSIBLE and smart.
      1. Repeal the 16th Amendment.
      2. Tax Consumption NOT PRODUCTION (income).
      3. Abolish The IRS; send their weapons trained Agents to PROTECT OUR BORDERS!
      4.That's All Folks!
      By Informed Choice, we live in a state without Personal Income Taxes, Estate Taxes and coming soon, NO Corporate Taxes.Our Flat sales tax is below California's Sales Tax! American's can still vote with our feet, our capital, income and culture.
      April 15 is just another day, State Tax-Wise, in Florida…Unless I decide to buy another $120,000 Porsche!

    155. Glenn Drennen says:

      Your Flat tax idea is not a good one because it still taxes income. You already have it loaded with deductions, entitlements, and incentives, which means that you approve of using the tax code to manipulate people to do certain things. Leave people alone to do what they want to do with their money, that is how you stimulate an economy. The Fairtax is the answer, taxing consumption, not income. Fairtax.org, read and learn, then see if you can move yourselves outside of that box in which you have confined yourselves. Lets fix the tax code by eliminating the tax code, not bending and reshaping so that the same old same old becomes the new old same old. Cut loose, break free, eliminate the income tax and the IRS and you eliminate everything that stands between us and prosperity. The Fairtax, that's Fairtax.org.

    156. David Creighton says:

      I'm a retired senior living off social security and my wife's retirement. We're presently paying about 10% on federal income tax, and to use you simplified plan , multiplying 28% times our gross income, would increase our tax by 280%. I don't think I like that. Yes, we need tax reform, but increasing our taxes by that amount isn't it. We also have property taxes, sales taxes, state taxes (presently 10% and going higher). Why is your flat tax almost double what the Ryan Plan projects. I think we need to concentrate more on cutting spending, and I don't mean defense spending.

    157. pat r says:

      if you want simple and coherent, look seriously at the FAIR TAX.Comprehensive means convoluted & exceptions for this and that.the FAIR TAX is truly "fair"….

    158. Jack says:

      THE FAIR TAX IS THE ANSWER not some form of the existing income tax. The 16th amendment repealed and ALL INCOME taxex gone. Pay at the Retail point of sale for ALL. http://www.fairtax.org

    159. Randy H says:

      Get rid of career politicians. Senators may serve two elected 6 year terms and at most serve 14 years. Change the term for the House of Representatives from two years to four years. Allow them to serve three elected terms and at most 14 years. No more than 14 years of service for either at the federal level. Let them go out in the real world and get a real job.

      Taxpayers vote on raises and compensation.

      Modify the personal income tax code to a flat tax of 5.5 or 6%. When someone has paid $200K in income tax reduce their rate to 2%. Let them stop paying income tax at $2 million income tax paid. Eliminate the long term capital gain and dividend tax. Reduc the short term capital gain and dividend tax to 3%.

      Are Dr. Walter E. Wlliams and I the only two American citizens that do not understand why the average working tax payer is content to work until April 30 of the year to pay the government's bills? Do I understand correctly that the Federal government exists to provide security/military and keep the interstate highway system in proper working order, not much else?

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