1 00:00:01,980 --> 00:00:07,779 The American Revolution started as a tax revolt – over a single tax on tea! 2 00:00:07,779 --> 00:00:08,899 Now look at us. 3 00:00:08,900 --> 00:00:11,600 It seems like everything we do is taxed. 4 00:00:11,600 --> 00:00:17,720 The system behind these taxes is a bureaucratic monstrosity; a dead weight on the economy. 5 00:00:17,720 --> 00:00:21,440 And it erodes our trust in the government that's taxing us. 6 00:00:21,449 --> 00:00:25,209 If you have enough lawyers, lobbyists, and loopholes at your disposal 7 00:00:25,209 --> 00:00:27,249 maybe you can game the system. 8 00:00:27,249 --> 00:00:31,859 That's fine for big corporations and wealthy individuals, but what about the small business 9 00:00:31,859 --> 00:00:34,590 owner or the middle class taxpayer? 10 00:00:34,590 --> 00:00:37,520 He just has to shut up and pay up. 11 00:00:37,520 --> 00:00:41,700 Nothing better illustrates the disaster that our tax system has become than the mother 12 00:00:41,700 --> 00:00:45,460 of all taxes: the federal income tax code. 13 00:00:45,460 --> 00:00:50,980 This tax alone, with all its attendant rulings and interpretations, is estimated to be about 14 00:00:50,980 --> 00:00:53,820 10 million words – and rising! 15 00:00:53,820 --> 00:00:58,380 Several years ago, Money magazine took a hypothetical family's finances 16 00:00:58,380 --> 00:01:01,860 and gave the numbers to 46 tax preparers. 17 00:01:01,860 --> 00:01:04,720 Forty-six different estimates came back. 18 00:01:04,720 --> 00:01:10,380 In some cases those differences ran into the thousands of dollars of what the family owed. 19 00:01:10,380 --> 00:01:14,640 This from experts who are considered to be the best in the business. 20 00:01:14,640 --> 00:01:19,380 But the taxes themselves are only part of the cost of this toxic code. 21 00:01:19,380 --> 00:01:24,440 There's also the cost of compliance – the time, money and effort it takes Americans 22 00:01:24,440 --> 00:01:26,600 to prepare their taxes. 23 00:01:26,600 --> 00:01:34,940 A George Mason University study puts the annual cost of compliance as high as $378 billion 24 00:01:34,940 --> 00:01:41,260 and the total annual economic cost (including work hours) at more than $600 billion. 25 00:01:41,270 --> 00:01:44,870 Again, these are annual costs – as in every year! 26 00:01:44,870 --> 00:01:49,560 That's a lot of money that could be used in more productive ways—creating new products, 27 00:01:49,570 --> 00:01:54,260 new services, new medical devices, new cures for diseases. 28 00:01:54,260 --> 00:01:59,040 Clearly, the time has come to drive a stake through the heart of this tax monster. 29 00:01:59,040 --> 00:02:00,820 So, what should be done? 30 00:02:00,820 --> 00:02:07,080 Like most things, the best solution is the most simple: A single flat tax with no deductions, 31 00:02:07,090 --> 00:02:11,030 except for a deduction for each adult and for each child. 32 00:02:11,030 --> 00:02:16,390 Fill out a sheet of paper or key in a few numbers on your computer, and you're done. 33 00:02:16,390 --> 00:02:21,620 This one change would not only make every citizen's life easier, it would also transform 34 00:02:21,629 --> 00:02:27,189 government, our economy, and our society by ending the complexity that gives bureaucrats 35 00:02:27,189 --> 00:02:30,139 and politicians so much power. 36 00:02:30,139 --> 00:02:35,049 They have power because they're the ones who dole out the tax favors. 37 00:02:35,049 --> 00:02:36,969 It wasn't always this way. 38 00:02:36,969 --> 00:02:40,249 There was a time when corporations primarily lobbied Washington 39 00:02:40,249 --> 00:02:42,680 to keep government out of their businesses. 40 00:02:42,680 --> 00:02:44,060 That has changed. 41 00:02:44,060 --> 00:02:48,939 In the words of The Atlantic, “The evolution of business lobbying from a sparse reactive 42 00:02:48,939 --> 00:02:55,310 force into a ubiquitous and increasingly proactive one is among the most important transformations 43 00:02:55,310 --> 00:02:59,450 in American politics over the last 40 years.” 44 00:02:59,450 --> 00:03:04,700 This favor-seeking is centered on getting special treatment and tax breaks. 45 00:03:04,709 --> 00:03:10,709 A flat tax will help us begin to scale back that special interest-loving, crony-capitalist 46 00:03:10,709 --> 00:03:13,749 big government that we all complain about. 47 00:03:13,749 --> 00:03:18,580 Everyone would pay less—not only in taxes, but also in compliance. 48 00:03:18,590 --> 00:03:21,690 Investment and job creation would skyrocket. 49 00:03:21,690 --> 00:03:26,830 We'd experience a recovery that would grow the tax base and—irony of ironies— 50 00:03:26,830 --> 00:03:30,260 ultimately generate more revenue for government. 51 00:03:30,260 --> 00:03:34,340 I go into this in much greater detail in my book, Reviving America, 52 00:03:34,340 --> 00:03:36,740 but here, in essence, is how it works. 53 00:03:36,740 --> 00:03:42,180 Everyone—individuals and corporations—pays a 17 percent flat rate. 54 00:03:42,180 --> 00:03:44,720 This single rate is absolutely critical. 55 00:03:44,720 --> 00:03:49,360 Whenever we have two or more tax rates, they're like rabbits: they breed. 56 00:03:49,360 --> 00:03:54,340 We saw that with the 1986 tax reforms, which consisted of two rates. 57 00:03:54,340 --> 00:03:58,000 They've since multiplied into the seven we have today. 58 00:03:58,000 --> 00:04:01,940 Well, you might argue, this sounds great for the rich, and even the middle class, 59 00:04:01,940 --> 00:04:03,560 but what about the poor? 60 00:04:03,560 --> 00:04:06,380 Seventeen percent is a big burden. 61 00:04:06,380 --> 00:04:11,700 That's why, under this plan, a family of four who makes less than $52,800 62 00:04:11,700 --> 00:04:14,000 would pay no income tax. 63 00:04:14,000 --> 00:04:16,780 That's double the current federal poverty level. 64 00:04:16,780 --> 00:04:21,140 This will let people at low income levels keep more of their money. 65 00:04:21,150 --> 00:04:25,150 And for those who think the rich should pay more, they will. 66 00:04:25,150 --> 00:04:29,030 Prior to the passage of the tax cuts that President Ronald Reagan pushed through Congress 67 00:04:29,030 --> 00:04:34,370 in 1981, the top one percent of American earners accounted for nearly 18 percent 68 00:04:34,370 --> 00:04:36,979 of federal personal income tax revenue. 69 00:04:36,979 --> 00:04:43,889 By 1988, that same group accounted for nearly 28 percent, an increase of 10 percentage points 70 00:04:43,889 --> 00:04:46,210 in only 7 years. 71 00:04:46,210 --> 00:04:51,800 By eliminating loopholes and requiring everyone to pay their fair share, the flat tax offers 72 00:04:51,800 --> 00:04:54,300 a model of tax fairness. 73 00:04:54,300 --> 00:04:58,980 More than 40 countries and jurisdictions have enacted the flat tax. 74 00:04:58,980 --> 00:05:03,480 When all the facts are considered, the real question is not whether America should implement 75 00:05:03,490 --> 00:05:06,910 this vital reform, but what are we waiting for? 76 00:05:06,910 --> 00:05:09,919 It's time for another tax revolution. 77 00:05:09,919 --> 00:05:13,099 I'm Steve Forbes for Prager University.