Proposal

For a  voluntary 15% flat tax

Presented by Roland A. Boucher

at the NATIONAL TAXPAYERS CONFERENCE 01

June 15 through 17 Radisson Hotel St. Louis Missouri

Summary

This  Proposal can result in a defacto Flat Tax of 15% for over 95% of American taxpayers. It would  give seniors and others, the opportunity to compute the tax burden for their particular income level by using the simple one page 1040EZ Tax Form.  All data needed to complete this form is supplied by third party; banks, employers, etc. thereby eliminating the fear of an audit.  The complexity would be greatly reduced because the accompanying  instructions would be reduced from the 61 pages to two .

The legislation Requires:

1 That Seniors and others be allowed to use the  IRS 1040EZ  Tax Form by removing the current restrictions on age and allowing  income from interest, dividends, pensions, and capital gains.

2 That the current income limit of  $50,000 be raised to $100,000 for Married couples, and the tax rate be limited  to no more than 15 percent to provide comparable tax level offered those claiming itemized deductions on IRS Forms 1040 and 1040A. 

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Background Information

This Concept was first introduced at  the National Silver Haired Congress in 1999 and was selected to be in the top 20 proposals in 2001. A State  Version AP 35 (540-EZ) by Senior Assemblywoman Dee Erman was introduced in 2000 and was selected as a top ten CSL  proposals for the 2001 legislative session.    

 

Studies, Reports, Statistics and Facts 

Senior Population  in  USA               35 Million over 65......Census Bureau

1040 EZ Short form users  in USA    21 Million (18%) in 1996.........IRS # 1304

Standard Deduction Filers in USA    84 Million (70%)  in 1996.........IRS # 1304

Restrictions preventing Taxpayers from using the 1040 EZ short form

1. You are Age 65 year  of Age or older

2. You have more than $400  income from Interest

3. You have any income from Dividends

4. You have any income from Pensions

5. You have any income from Capital Gains

6. Your total income is more than $50,000 single or married

Note: Restriction # 6  imposes a severe penalty on married couples who would otherwise be allowed to use the short form.   CA State Controller Kathleen Connell removed  a similar marriage penalty when introducing the new 540-2EZ form for 2000. Removing restrictions 1 through 5  would allow 80 million taxpayers  nation wide to use the simple 1040-EZ tax form.

 

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Expanding the coverage to  over 90 percent of taxpayers

30 percent of tax filers now itemize their deductions. These deductions increase with income and are more valuable to the  wealthy  and upper middle class . The  IRS  imposes a  second 28% tax bracket on these taxpayers which   counteracts the benefits of the  itemized deductions allowed them.  Many of These  Taxpayers can be induced to use the  1040-EZ Tax  Form which  allows  no itemized deductions by  limiting the tax rate allowed short form filers to 15% . By this simple strategy it may be possible to expand the use of the 1040-EZ  to over 90 percent of American Taxpayers

 

 References:  1  IRS Statics of Income Annual Report for 1997

                   2  Census bureau web site

Legislative History

A State Version (AB 2347) of this Proposal was Introduced in the California Legislature  in 2000  by  Assemblywoman Patricia Bates. In 2001  AB 1370, SB 831  and AB 305 a two year Bill were introduced.   AB 1370 a study bill has passed the assembly unopposed. Congressman Chris Cox of California plans to  introduce this legislation in the House of Representatives this month.

Fiscal Impact 

Once the Presidents tax cut is fully phased in this proposal is revenue neutral up to the salary of a Congressman.

Who have offered their support

The National Taxpayers Union

Citizens for a Sound Economy

United Seniors of America

United Californians for Tax Reform

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Enabling legislation Proposed in California 

THE PEOPLE OF THE STATE OF  CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1.  Section  17041.1 is added to the Revenue and Taxation Code, to read:
17041.1.  (a) Notwithstanding any other law, in the case of a taxpayer whose total income for the taxable year is fifty thousand dollars ($50,000) or less in the case of a single person and one hundred thousand dollars ($100,000) or less in the case of a married couple filing a joint return, all of the following shall apply:
(1) The taxpayer shall have the option to use Form 540EZ, as revised by the  Franchise Tax Board to reflect the provisions of this section.

(2) The taxpayer shall be allowed a standard deduction in an amount equal to the minimum wage for the taxable year multiplied by 1040.

(3) The amount of tax imposed under this part shall be an amount equal to total income minus the standard deduction multiplied by .025.

(b) For purposes of this section, "total income" means both of the  following:

      (1) Wages, salaries, and tips.

      (2) Taxable dividends, interest, and pension  and capital gains income from Federal Form 1099.

 SEC. 2.  This act provides for a tax levy within the meaning of Article IV of  the Constitution and shall go into immediate effect.

Note: References to the Minimum wage and to Capital Gains income were deleted by the authors in 2001 legislative session