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Chart of the Week: How to Simplify the Tax Code and Lower Taxes

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Unread 12.19.11, 08:37 AM
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Chart of the Week: How to Simplify the Tax Code and Lower Taxes

On 12.19.11 08:06 AM posted by Rob Bluey

House Republicans return to Washington today to vote on a two-month payroll tax extension. If news reports are correct, the bill is likely to fail, leaving in doubt how lawmakers will resolve their differences before the year draws to a close.

These year-end squabbles are now routine business in the nation’s capital. At issue in this case is the short-term extension of the payroll tax rate through February.

“I believe that two months is just kicking the can down the road.*The American people are tired of that. Frankly, I’m tired of it,”*Speaker John Boehner (R-OH) said Sunday on*NBC’s “Meet the Press.”

There is a better way. Earlier this year, The Heritage Foundation outlined a comprehensive approach to tax reform that would provide the permanence and certainty in the tax system that American taxpayers want and the economy needs. Heritage’s plan, called Saving the American Dream, would replace income and payroll rates with a flat tax rate of 28 percent for everyone.

Heritage’s J.D. Foster detailed the plan last week:
The current tax system discourages saving. It discourages investment. It discourages entrepreneurship. It causes decision makers to misallocate the nation’s resources, limiting productivity gains, wage gains, and the nation’s overall level of international competitiveness. And, it is far, far too complicated. The New Flat Tax is the remedy. It replaces every major tax collected by the federal government. For non-seniors, it is as easy as one, two, three—one rate, two credits, three deductions. For seniors on Medicare, one of the two credits—for health insurance—is replaced by an extra deduction. The New Flat Tax is simple, revenue-neutral, and will allow America to achieve its full economic potential.

This week’s chart reveals why it is so crucial for Congress to consider reform. Without major changes or significant spending cuts, tax rates are projected to skyrocket in the years and decades to come.

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