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39 Tax Features 1 (1994-1995)

handle is hein.tera/taxfeaturs0039 and id is 1 raw text is: TAX(%iiiiii' FOUNDATION TAX December 1994January 1995 Volume 39, Number 1 Armey Flat Tax Proposal Would Reduce Average Taxpayer Federal Tax Burden by $1,000 A Tax Foundation analysis of Rep. Dick Armey's (R-Texas) flat tax plan-which Republican leaders hope to include in the 1996 GOP platform-shows that his proposed 17 percent across-the-board rate would reduce the average American taxpayer's federal tax burden by $1,000 a year (see Chart 3, page 3). In addi- tion, the effective average tax rate that individuals pay on income taxes would fall for virtually all income groups (see Chart 1). While most of the other recent tax relief proposals make modest adjust- ments within the current tax system (see related story, page 2), Rep. Armey's plan would replace the current indi- vidual and corporate income tax with a flat tax to simplify the federal tax code, reduce the tax burden on all Americans, and promote economic growth. To pay for the reduction in revenues generated by his plan, the congressman also calls for major reductions in government spending and strict budget rules to guarantee that these cuts occur. Not only would the flat tax replace the current system of graduated tax rates with a single tax rate, says Tax Foundation Senior Economist Arthur P. Hall, II, it would eliminate the long-time bias in the current tax code against saving and investment. In his analysis of the Armey plan, Dr. Hall takes into account the phase-in Flat Tax continued on page 3 Let's Change the Federal Estate and Gift Tax Laws-and Help the Economy Rep. Bill Brewster (D-Oklahoma) 4-5 Chart 1: Flat Tax (17%Rate) vs. Current System 40% Current 350% w > >, 20%o < a) > 1l5o ._0 10% 0%, (D O C0 LO CD CD C, C')2 00 (ft Note: Analysis includes an equal Capital/labor split on absorbing the business tax. Sotrce: Tax Foundation. FRN

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