Weekly Column of U.S. Senator Lamar Alexander (R-TN) -- “Americans Should Have the Option of Filing a One-Page Federal Income Tax Return”

Posted on April 21, 2008

Americans work nearly four months a year to pay local, state, and federal taxes. Adding insult to injury, at filing time many Americans spend hundreds of dollars and hour upon hour poring over the forms required to pay their taxes. That’s why I have introduced legislation – the Optional One Page Flat Tax Act – that will make it possible for American taxpayers to file their tax returns on one page. The frustration of filing would be eliminated. My legislation is very straightforward. By choosing the optional flat tax, an individual or a business could choose to file a one-page form and be taxed at a flat rate – 19 percent for the first two years after the bill becomes law, and 17 percent thereafter. Think what a change that would be. Think how much simpler tax day would be if it were possible to fill out one page and then send that to the IRS. In 2005, taxpayers spent 6 billion hours and approximately $265 billion to comply with the Tax code and the costs are only expected to rise. On average, Tennesseans pay $705 a year preparing their taxes. Taxpayers spend on average more than 26 hours to complete tax returns, and 13.6 hours just to complete form 1040. Think how much extra leisure time or productive work time we could have if every American had the option of a one-page simplified tax return. If an individual selects the option to pay a flat tax in lieu of the current income tax, the option is irrevocable. But unlike previous proposals, my legislation would not require every American to switch to the flat tax, but instead leaves that choice up to each taxpayer. Under the flat tax, taxable income has a very simple definition. It will consist simply of wages and pensions. You would not start paying taxes on your income – wages and pensions – until you reach a certain exemption level. For a married couple filing jointly, the exemption level is $25,580. For the single head of a household, you wouldn't start paying taxes until you reached $16,330. For a single person, that figure would be $12,790. You would add $5,510 for each dependent. Each of these exemption amounts would be indexed to inflation. For example, a family of four would not pay the flat tax until the family's combined income reached $36,600. That is $25,580 for joint filers plus $5,510 for each of the two dependents. No other deductions would exist. This optional flat tax would eliminate the marriage penalty, so it is pro-family. This optional flat tax would eliminate the millionaires’ tax – also known as the Alternative Minimum Tax, or AMT – which was put in place in the late 1960s to catch a few millionaires and today is catching millions of middle-class Americans. The optional flat tax that I propose is intended to be revenue neutral. It is intended, in other words, neither to raise more revenues than the current tax system or less revenues than the current tax system. Arguably, a simpler tax will raise more revenues because a great many people pay less in taxes because they simply do not understand the forms. But the intention of my legislation is that the taxes collected, the revenue level, will be the same. The current tax system is overly complicated and lengthy. The Tax code and corresponding regulations are over 67,000 pages and include 7 million words. It was only 400 pages in 1913 when the Federal income tax was first introduced, and it has now grown to over 67,000 pages. Not only is the code complicated, it is also in flux. It is unclear whether Congress will allow tax relief passed in 2001 and 2003 to expire which would lead to the largest tax hike in history – my reform would provide some long term predictability so a taxpayer or small business would know from year to year what to expect on tax day. Taxpayers are expected to understand and comply with this complicated Tax code and it gets increasingly impossible to do. That is why I, and a great many Americans and American businesses, will welcome the opportunity to file a one-page, simplified flat tax in lieu of the current system. It will save money. It will encourage growth, and it will relieve a great deal of anxiety that occurs every spring when April 15 rolls around. ###