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Washington, D.C., Apr 15, 2009 - Congressman J. Randy Forbes (VA-04) announced today that he has cosponsored a simpler and fairer tax plan for American families, the Freedom Flat Tax Act. The legislation would create an optional flat tax that would eliminate taxes on savings, capital gains, and dividends, and allow individuals to accomplish their taxes on a one page form in 30 minutes.   

“Tax Day has become a day that Americans have come to dread, because they must respond to an income tax system that is complicated, unpredictable, and unfair. The outcry we’re consistently hearing from Americans, like the Tea Parties taking place today, should be a wake-up call to Washington that hardworking Americans have had enough with our current tax system. They want a commonsense system that reduces taxes. An optional flat tax creates the kind of dramatic overhaul we need in our tax system to reduce taxes, simplify the tax process, and add certainty for consumers and businesses,” said Forbes. 

Two-thirds of Americans think the current income tax system is too complex. Each year, Americans spend 3.8 billion hours preparing their tax forms.  A flat tax would save taxpayers time and money, treat all taxpayers the same, and stimulate economic growth. In Colorado, a single income tax rate generated so much surplus revenue that lawmakers are now proposing a reduction in the original flat tax rate.  In Indiana, corporate rate income tax receipts have increased 250 percent since going to a single rate in 2003.  

Specifically, H.R. 1040 would allow an individual or business person to opt out of the current tax system for a flat tax of 19% for the first two years and 17% thereafter. There would be no deductions aside from the basic standard exemption and additional standard exemptions for each dependent. The business tax would consist of the total costs of taxed inputs subtracted from total sales; only employee wages and pensions would be deductible. Additionally, the flat tax would: 

-          Eliminate the marriage penalty
-          Repeal the death tax
-          Abolish the Alternative Minimum Tax
-          Eliminate capital gains taxes
-          Allow for immediate expensing for business capital equipment 

Because the flat tax is optional, anyone who preferred the current tax system could continue using it. 

Congressman Forbes has received the “Hero of the Taxpayer” award from Americans for Tax Reform (ATR) for his strong record on tax reform in Congress. For more information on Congressman Forbes’ work on tax reform issues, visit randyforbes.house.gov/issues/economy.htm.