A significant amount of attention during this campaign has focused on simplifying the tax code. There is no question that our tax code has become a burden to the American people and must be reformed. In our 21st Century Contract With America, we address tax simplification in a way that is both bold and pragmatic. As Speaker of the House of Representatives, I led the effort to reform welfare, resulting in 66% of those on welfare getting a job or going to school. So I know what it takes to actually pass historic reforms. The 21st Century Contract With America has a tax simplification plan that I am uniquely qualified to pass through Congress. Here is the plan you have helped us develop:
All tax filers would be given the option to pay their income taxes under the current income tax provisions or choose to pay income taxes under a lower single rate of taxation of 15% or less with limited deductions.
This optional flat tax reform could save taxpayers more than an estimated $400 billion in compliance costs each year such as record keeping, paying for tax advice, and filling out complicated tax returns. This savings doesn't even account for eliminating the countless hours of aggravation and worry and the sheer complexity of tax compliance. These tax compliance savings are the functional equivalent of a permanent, pro-growth tax cut and will provide a substantial boost to our annual growth rate.
This faster, flatter, fairer tax structure would also be simple: tax returns could be done on a single page. Subtract from your income a standard deduction and deductions for charity and home ownership, multiply the result by the fixed single rate of taxation of 15% or less, and the process is over. Gone will be the stressful hours spent figuring out whether you qualify for this or that deduction. No more headaches trying to determine where estimated tax payments go. Tax preparation fees could be money spent on something more rewarding.
Such an optional flat tax system would create a new standard deduction, which would be above the established poverty level, meaning an optional flat tax would not unfairly target the poor. And because the flat tax is optional, it does not raise taxes on a single person or unfairly impact seniors or lower income workers.
Once we combine these pro-growth tax reforms with my other reform proposals for welfare reform, social security, and lower spending contained in the 21st Century Contract with America, we will experience a stunning and swift turnaround in the economy.
