Flat Tax: An Overview of the Hall-Rabushka Proposal (CRS Report for Congress)
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| Release Date |
Revised Nov. 29, 2011 |
| Report Number |
98-529 |
| Authors |
James M. Bickley, Government and Finance Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
This report begins with discussions of congressional interest in the flat tax, the concept of anincome tax base versus a consumption tax base, and three types of broad-based consumptiontaxes. Next, the justification and operation of the proposed H-R flat tax are explained. Lastly,selected policy issues are examined, including both broad and narrow economic issues,simplicity, and international comparisons. The broad economic issues relate to the economiceffects of the flat tax on the entire economy, for example, equity, efficiency, and internationaltrade. The more narrow economic issues deal with specific industries or sectors of the totaleconomy, such as housing or charitable organizations.e report begins with discussions of congressional interest in the flat tax, the concept of anincome tax base versus a consumption tax base, and three types of broad-based consumptiontaxes. Next, the justification and operation of the proposed H-R flat tax are explained. Lastly,selected policy issues are examined, including both broad and narrow economic issues,simplicity, and international comparisons. The broad economic issues relate to the economiceffects of the flat tax on the entire economy, for example, equity, efficiency, and internationaltrade. The more narrow economic issues deal with specific industries or sectors of the totaleconomy, such as housing or charitable organizations.In the 111th Congress (as of June 18, 2009), seven bills have been introduced that includeproposals for fundamental tax reform; that is, basic changes in what is taxed, in tax rates, in howtaxes are collected, or some combination of these reforms. Two of these bills are companion billsand would replace the current income tax system with a national retail sales tax. A third billwould broaden the income tax base ("simplified taxable income") and reduce marginal tax rates.The other four bills for fundamental tax reform include a flat tax based on the concepts of H-R.On February 12, 2009, Representative Michael C. Burgess introduced H.R. 1040, the FreedomFlat Tax Act. On May 4, 2009, Senator Lamar Alexander introduced a companion bill, S. 963, theOptional One Page Flat Tax Act. These bills would authorize an individual or a person engagedin business activity to make an irrevocable election to be subject to a H-R flat tax (in lieu of theexisting tax provisions). On March 30, 2009, Senator Arlen Specter introduced S. 741, Flat TaxAct of 2009. On April 30, 2009, Senator Richard C. Shelby introduced S. 932, the Simplified,Manageable, and Responsible Tax Act. S. 741 and S. 932 would levy a flat tax modeled after theH-R proposal as a replacement for the individual and corporate income taxes, and the estate andgift taxes. This report will be updated as issues develop or legislation is introduced.Bills: H.R. 1040, S. 963, S. 932, S. 741
