Sipprelle Proposes Flat Tax, Wants to Scrap Federal Tax Code

Princeton, February 16, 2010 – “For decades, Americans – individual, families and businesses alike – have been forced to negotiate an overly complex federal tax code that requires them to hand over excessive amounts of their hard-earned income to the federal government in the form of taxes,” said Scott Sipprelle (R-Princeton), candidate for Congress in New Jersey's 12th Congressional District. “My plan will cut taxes for every American taxpayer, while scrapping our onerous federal tax code once and for all. My single-rate flat tax proposal will empower individuals, fuel innovation, and foster an economic resurgence that creates millions of new jobs for our citizens.”

The Problem: The Failed Federal Income Tax Code

America's federal income tax code is a monument to our legislative decay. Composed of more than nine millions words written in unintelligible legalese, this instrument of repression represents a brutal indictment of a system that, over many years, has sold its soul to an ideology that worships government control of our economic lives.

While no one can argue about the need for federal tax revenue to pay for the cost of government's essential service, our nation has grown tolerant of Congress's use of the tax code as a collective honey pot to award tax benefits to special interests and to dole out political favors.

Since this tax code gimmickry accumulates over time depending on the shifting political coalitions, the lobbying successes of the special interests, and the policy fad of the day, taxpayers are left to pay for the consequences of a legislative monstrosity that tramples the common good through excessive taxation and a destructive complexity.

The source of any nation's wealth flows from the work, the innovation, and the productivity of its people. The precarious state of our nation's finances today makes even more urgent the need for our government to remove the shackles and financial penalties that are constraining the natural tendency of all of our citizens to work for their own prosperity and for the collective economic good. We must deconstruct the onerous tax burdens which have lead to the America's Great Stagnation. Consider these factors:

At nearly $22,000 the tax burden on American households today is one-third higher than historical averages, and this is before the impact of future tax increases contemplated to address the costs of runaway spending and staggering budget deficits. Tax hikes exceeding $60,000 per household would be required to balance the budget over the next ten years.

America's corporate tax rates are the second highest in the developed world, behind only Japan. These punitive levels of taxation are destroying economic activity by discouraging business formation, job creation, investment, and risk-taking. These high levels of taxation encourage our corporations to locate jobs in lower-tax jurisdictions offshore, while merely passing along the federal tax burden to consumers via higher prices.

The penalty of America's tax code extends beyond its damaging impact on the economy and wealth creation. The additional costs that result from compliance are also staggering. Taking into account the time and money spent by individuals and corporations on data collection, accounting and legal fees, and tax preparation, the economic burden of tax compliance has been estimated at $200 billion per year. When you add in the harmful effects on economic behavior that result from strategies for tax avoidance, the burden is even greater.


The Solution: Stop Tinkering With It…Scrap It!

In order to address America's critical need for national renewal, we must address the key impediment to economic vitality and efficiency. The time has come to swear off the tinkering and manipulation of our tax code. We need to scrap the damaging legacy of accumulated inside dealing and coercive economic micro-management and unleash a tax code that is simple and fair. Congress must have the courage to confront spending and taxes together, for the first time, like any family or business. That is the course I intend to pursue.

Implement a Flat Tax for All Taxpayers

Lower tax rates will unleash economic growth and job creation by encouraging work, capital formation and risk taking. A simplified tax code would amplify the benefits of lower tax rates by removing economic uncertainty and the administrative costs of tax compliance.

Congress should approve a flat 20% tax rate for both individual and corporate taxpayers. Income would be taxed only once removing the double taxation on dividends and savings.

The tax rate for individuals and families would kick in only after a generous exemption for adults and children, setting a significant tax shield for lower income wage earners. This approach is designed to create a lower tax rate for all taxpayers, while also exacting a lower marginal tax bite on increased levels of income.

Any individual taxpayer would have the choice of filing under the new flat tax plan or staying with the old system of higher marginal tax rates and larger numbers of deductions in order to provide certainty to the premise that no taxpayer would ever pay higher taxes under the flat tax.

The benefits of this radical change would be enormous, unleashing an explosion of work and innovation, motivated by the dramatically enhanced incentives for personal wealth creation.

It would leave all income earners with an increased level of after-tax income to support spending on their own priorities, as opposed to the priorities of the political-lobbyist class.

It would dramatically expand the pool of individual and institutional capital available to fund new businesses and jobs. Capital is the fuel which feeds the furnace of economic growth. Taxes that punish the return on invested capital reduce the incentive to invest and thus the economy's ability to drive jobs, income, and growth.

It would enhance the amount of capital searching for investment opportunities in America, as opposed to searching out higher growth opportunities in lower tax regions offshore.

It would eradicate the useless economic activity embedded in the tax shelters business and dramatically reduce incentives for tax evasion, while once again making America a business-friendly locale for expansion by abolishing the corporate loopholes that companies use to shield taxes.

It would dramatically reduce the enormous national resources dedicated to tax compliance. Imagine being able to calculate your taxes on your own, on a single sheet of paper. Imagine the national windfall that would flow from redirecting some large portion of $200 billion dollars back into productive economic pursuits.

It would wipe clean the institutionalized corruption that characterizes the powerful Congressional tax-writing committees, emasculate the fund-raising advantages of entrenched incumbents, and provide a powerful new competitive stimulus for our political process. In sum, the flat tax would unleash a new American prosperity, richening the balance sheets of our citizens while also swelling federal tax receipts in due course as the economy and payrolls boom.