Time to flatten Uncle 'Gimmee'

Government has become America's #1 growth industry. The U.S. public sector is now larger than the entire economy of every other country in the world, except Japan. More American work for government than are employed in manufacturing. To pay for all this, federal taxes and the IRS system of tax collection have spiraled out of control. Examples:

• The average family of four now pays more in taxes than it spends on food, clothing and shelter. In fact, every American works from January 1 to July 10, more than half the year, not to support a family, but just to pay the costs of government taxes and regulation.

This is a sampling from the indictment of the U.S. tax system detailed last week; by House Majority Leader Dick Armey (R-Tex.) as he unveiled his proposal for a flat tax that is so simple it can be filed on a post card. Here's how it works: The Armey flat tax taxes all income at one low rate -- 17%. The 17% rate is applied after subtracting a generous "family allowance", which totals $33,300 for a family of four. This includes a marriage deduction of $22,700 and $5,300 for each dependent.

Deducting the family allowance gives the flat tax a strong element of progressivity -- i.e., people who make more pay a higher rate.

That's about it. The flat tax taxes every dollar in the economy once and only once and all at the same rate, after subtracting the family exemption. The flat tax eliminates the double taxation of savings and investment. The flat tax also gets rid of the maze of exemptions, loopholes, depreciation schedules, graduated rates and targeted tax breaks that now drive people crazy at tax time -- and fill the pockets of tax attorneys and accountants whose expertise is needed to maximize the earnings a taxpayer is allowed to keep while keeping him or her out of jail.

The same simple approach applies to business income, which is taxed at 17% of the difference between revenues and expenses (when revenues are larger). Expenses include purchases of goods and services, capital equipment, structures, land, wages, and contributions to employee retirement plans. No deductions are permitted for fringe benefits, interest, or payments to owners.

There's a lot that's appealing about this simple, airtight system. It is pro-family. It's pro-savings, pro-investment, pro-growth. As Rep. Armey says, "It gives Americans an honest bill for their share of the cost of government...and there are no hidden preferences for special interests. That's not a bad place to begin the tax reform debate.