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Tax bytes

Flat Tax

Armey and Shelby

  • The Armey Shelby flat tax, advocated by Steve Forbes during the 1996 Presidential primary campaign and recently reintroduced in Congress by Armey, entails scrapping the existing tax code.

    Instead, taxpayers would pay a flat 20 percent of income for the first two years, a rate that would then fall to 17 percent afterwards.

    Individuals and businesses would pay the same rate, and all deductions and would be eliminated. The only income not subject to the tax would be the first $33,800 of income, which would be exempt for everyone.

    While it has the appeal of simplicity, the plan has drawn fire because it would eliminate popular tax breaks such as the mortgage interest deduction enjoyed by millions of home owners.

    President Clinton has argued against a flat tax, saying that it would not provide the government with enough money to pay its bills.

    Under this plan, a family earning $50,000 with two children would pay $2,990 in federal taxes at the 17 percent rate, according to the Tax Foundation, a non-partisan tax analysis group in Washington.

    That compares with $3,967 the same family pays under the existing system.

    Flat Tax Sales Tax
    Savings Plan Clinton Plan

    T A X   B Y T E S   S P E C I A L   S E C T I O N

    M O N E Y:   T A X   G U I D E   +   F O R T U N E:   T A X   T I P S

    T A X   R E F O R M   +   I R S   U N D E R   A T T A C K   +   T A X P A Y E R   W O E S

    O N L I N E   T A X   L I N K S   +   T A X   Y O U R   K N O W L E D G E

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