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Wyden, Emanuel Join Forces for Middle Class Tax Relief
and “Simpler, Flatter, Fairer” Tax Plan
Bicameral legislation treats income from
work and wealth equally,
ends tax breaks that have shifted burden onto middle-class Americans
December 15, 2005
Washington, DC – At a press
conference today, U.S. Senator Ron Wyden (D-Ore.) and U.S. Representative
Rahm Emanuel (D-Ill.) touted their comprehensive, bicameral tax
reform legislation that contains major tax relief for America’s
middle class as it makes the U.S. income tax code simpler, flatter
and fairer. Wyden introduced the “Fair, Flat Tax Act of
2005” in the Senate in October; Emanuel announced plans
today to introduce companion legislation in the House of Representatives.
Specifically, the legislation allows every taxpayer to file taxes
on a simplified, one-page 1040 form, collapses individual tax
brackets from the current six down to three, and sets one flat
corporate rate. It also ends the Alternative Minimum Tax for personal
income taxes, and allows federal taxpayers who do not itemize
to receive a tax break for state and local taxes. Ending a number
of corporate tax preferences also allows the legislation to reduce
the deficit by approximately $100 billion over the next five years.
“Today’s tax system
is unnecessarily complex, inefficient and unfair to middle class
taxpayers. Our current tax policies have created a culture of
cheating and rampant tax avoidance. As a result, middle class
taxpayers are left to pick up the slack for those who don’t
pay their fair share,” said Emanuel. “Now is the time
to pass real tax reform so the tax code works for everyone instead
of a few.”
“For 20 years, the U.S. code
has been cluttered with tax breaks and loopholes, widened the
gap between wealth and work, and left the middle class to shoulder
the majority of the tax burden in our country,” said Wyden.
“Today we’re saying that we can provide real relief
to the middle class by making the system simpler, flatter and
fairer and we have a plan to do it. Right now, the cop walking
the beat pays a higher effective tax rate than someone who makes
their income from capital gains and dividends; that’s why
it’s time to start treating work and wealth equally in the
tax code.”
According to the Congressional Research
Service, the Fair Flat Tax Act of 2005 can provide tax cuts for
middle-class families and for families with wage and salary income
up to $150,000. Specifically, the Wyden-Emanuel plan:
• provides higher standard deductions for every individual,
• ends tax provisions that prefer unearned income such as
capital gains and dividends over wage and salary income, and
• provides an unprecedented, refundable 10 percent tax credit
for every taxpayer’s state and local taxes – a direct
benefit for the more than two-thirds of taxpayers who currently
do not itemize their taxes.
Corporate tax breaks targeted by
the “Fair Flat Tax Act” include those that offer preferences
to one business sector over another, as well as those that allow
companies to defer or avoid altogether paying some taxes. A number
of individual tax preferences are repealed under the legislation
as well, but those used most by Americans – including home
mortgage deductions, child credits, and breaks for charitable
contributions, health and education savings – remain, as
do protections for the most common investments for retirement.
America’s seniors, military and veterans and the disabled
will continue to receive targeted tax breaks contained in the
current code.
The Fair Flat Tax Act of 2005 has
been referred to the U.S. Senate Finance Committee, of which Wyden
is a member. Emanuel’s version of the legislation is expected
to be referred to the House Ways and Means committee, of which
he is a member.
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