based on the Hall/Rabushka flat tax would replace the current personal and corporate income tax with a simple 17 percent tax on all income. With the exception of a generous family allowance ($33,300 for a family of four), all labor income is taxed at the individual level. Taxes on business income (such as interest, dividends, capital gains, and rent) are withheld and paid at the business level. Both businesses and individuals would fill out simple post card sized returns (Mitchell 3, 3). Using the same model as the Armey/Shelby flat tax, Senator Arlen Specter, purposes a slightly higher rate of 20 percent and lower personal allowance in order to maintain limited deductions for charitable contributions and the full deduction for home mortgage interest (Mitchell 2, 3). Steve Forbes proposal is much the same as the Armey/Shelby proposal. Forbes uses the same 17 percent as the Armey/Shelby plan, but increases the family of four allowance to $36,000 (Mitchell 3, 3). Senator Phil Gramm and Pat Buchanan both setup their respective proposals quite different from the others. Gramm uses a 16 percent rate, however keeps deductions for home mortgage interest and charitable deductions, but the biggest difference is the continued double taxation of many forms of income. Capital gains taxes would not be abolished, while income used for savings would continue to be taxed twice and the bias against business investment would be reduced, but would not be eliminated (Mitchell 3, 3). Buchanan follows Gramm’s format but uses a low 15 percent rate. Corporate profits would continue to be taxed at both the individual level and the business level. Savings would be taxed twice. There would be a flat 17 percent rate on corporations, but provisions biasing the current system against investment, such as the alternative minimum tax and depreciation, would remain (Mitchell 3, 3). All of these competing flat tax proposals are possible plans for tax...
