HR 1040 IHCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to provide taxpayers a flat tax alternative to the current income tax system.CommentsClose CommentsPermalink

February 12, 2009CommentsClose CommentsPermalink

Mr. BURGESS introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Rules, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concernedCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to provide taxpayers a flat tax alternative to the current income tax system.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Freedom Flat Tax Act’.CommentsClose CommentsPermalink

SEC. 2. FREEDOM FLAT TAX.

(a) In General- Subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after part VII the following new part:CommentsClose CommentsPermalink

‘PART VIII--FREEDOM FLAT TAX

‘Sec. 60. Irrevocable election to be subject to flat tax.CommentsClose CommentsPermalink





‘Sec. 60A. Tax imposed on individuals.CommentsClose CommentsPermalink





‘Sec. 60B. Tax imposed on business activities.CommentsClose CommentsPermalink





‘Sec. 60C. Tax on noncash compensation provided to employees not engaged in business activity.CommentsClose CommentsPermalink

‘SEC. 60. IRREVOCABLE ELECTION TO BE SUBJECT TO FLAT TAX.

‘(a) Individual-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Except as provided in paragraph (2), in lieu of the tax imposed by sections 1 (relating to tax imposed) and 55 (relating to alternative minimum tax imposed), under regulations prescribed by the Secretary, an individual may make an irrevocable election to be subject to the tax imposed by this part.CommentsClose CommentsPermalink





‘(2) INNOCENT SPOUSE EXCEPTION- An individual who has made an election under paragraph (1) and who subsequently obtains relief of liability for tax under section 6015(b) may, not later than 1 year after the date such relief is granted, revoke the election made under paragraph (1).CommentsClose CommentsPermalink





‘(b) Person Engaged in Business Activity- In lieu of the tax imposed by sections 11 (relating to tax imposed) and 55 (relating to alternative minimum tax imposed), under regulations prescribed by the Secretary, a person engaged in business activity may make an irrevocable election to be subject to the tax imposed by this part.CommentsClose CommentsPermalink





‘(c) Disallowance of Credits- No credit shall be allowed under this chapter for any taxable year to any person with respect to whom an election under subsection (a) or (b) is in effect.CommentsClose CommentsPermalink

‘SEC. 60A. TAX IMPOSED ON INDIVIDUALS.

‘(a) In General- There is hereby imposed on the taxable income of every individual who makes an election to be subject to this part a tax equal to--CommentsClose CommentsPermalink





‘(1) 19 percent of the taxable income of such individual for such taxable year in the case of the first 2 taxable years of the individual beginning with the taxable year for which the election is made, andCommentsClose CommentsPermalink





‘(2) 17 percent of the taxable income of such individual for such taxable year in the case of all taxable years subsequent to the taxable years described in paragraph (1).CommentsClose CommentsPermalink





‘(b) Taxable Income- For purposes of this part, the term ‘taxable income’ means the excess of--CommentsClose CommentsPermalink





‘(1) the sum of--CommentsClose CommentsPermalink





‘(A) wages (as defined in section 3121(a) without regard to paragraph (1) thereof) which are paid in cash and which are received during the taxable year for services performed in the United States,CommentsClose CommentsPermalink





‘(B) retirement distributions which are includible in gross income for such taxable year, plusCommentsClose CommentsPermalink





‘(C) amounts received under any law of the United States or of any State which is in the nature of unemployment compensation, overCommentsClose CommentsPermalink





‘(2) the standard deduction.CommentsClose CommentsPermalink





‘(c) Standard Deduction- For purposes of this part--CommentsClose CommentsPermalink





‘(1) IN GENERAL- The term ‘standard deduction’ means the sum of--CommentsClose CommentsPermalink





‘(A) the basic standard deduction, plusCommentsClose CommentsPermalink





‘(B) the additional standard deduction.CommentsClose CommentsPermalink





‘(2) BASIC STANDARD DEDUCTION- For purposes of paragraph (1), the basic standard deduction is--CommentsClose CommentsPermalink





‘(A) $25,580 in the case of--CommentsClose CommentsPermalink





‘(i) a joint return, orCommentsClose CommentsPermalink





‘(ii) a surviving spouse (as defined in section 2(a)),CommentsClose CommentsPermalink





‘(B) $16,330 in the case of a head of household (as defined in section 2(b)), andCommentsClose CommentsPermalink





‘(C) $12,790 in the case of an individual--CommentsClose CommentsPermalink





‘(i) who is not married and who is not a surviving spouse or head of household, orCommentsClose CommentsPermalink





‘(ii) who is a married individual filing a separate return.CommentsClose CommentsPermalink





‘(3) ADDITIONAL STANDARD DEDUCTION- For purposes of paragraph (1), the additional standard deduction is $5,510 for each dependent (as defined in section 152) who is described in section 151(c)(1) for the taxable year and who is not required to file a return for such taxable year.CommentsClose CommentsPermalink





‘(d) Retirement Distributions- For purposes of this section, the term ‘retirement distribution’ means any distribution from--CommentsClose CommentsPermalink





‘(1) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),CommentsClose CommentsPermalink





‘(2) an annuity plan described in section 403(a),CommentsClose CommentsPermalink





‘(3) an annuity contract described in section 403(b),CommentsClose CommentsPermalink





‘(4) an individual retirement account described in section 408(a),CommentsClose CommentsPermalink





‘(5) an individual retirement annuity described in section 408(b),CommentsClose CommentsPermalink





‘(6) an eligible deferred compensation plan (as defined in section 457),CommentsClose CommentsPermalink





‘(7) a governmental plan (as defined in section 414(d)), orCommentsClose CommentsPermalink





‘(8) a trust described in section 501(c)(18).CommentsClose CommentsPermalink





Such term includes any plan, contract, account, annuity, or trust which, at any time, has been determined by the Secretary to be such a plan, contract, account, annuity, or trust.CommentsClose CommentsPermalink





‘(e) Income of Certain Children- For purposes of this part--CommentsClose CommentsPermalink





‘(1) an individual’s taxable income shall include the taxable income of each dependent child of such individual who has not attained age 14 as of the close of such taxable year, andCommentsClose CommentsPermalink





‘(2) such dependent child shall have no liability for tax imposed by this section with respect to such income and shall not be required to file a return for such taxable year.CommentsClose CommentsPermalink





‘(f) Inflation Adjustment-CommentsClose CommentsPermalink





‘(1) IN GENERAL- In the case of any taxable year beginning in a calendar year after 2010, each dollar amount contained in subsection (c) shall be increased by an amount determined by the Secretary to be equal to--CommentsClose CommentsPermalink





‘(A) such dollar amount, multiplied byCommentsClose CommentsPermalink





‘(B) the cost-of-living adjustment for such calendar year.CommentsClose CommentsPermalink





‘(2) COST-OF-LIVING ADJUSTMENT- For purposes of paragraph (1), the cost-of-living adjustment for any calendar year is the percentage (if any) by which--CommentsClose CommentsPermalink





‘(A) the CPI for the preceding calendar year, exceedsCommentsClose CommentsPermalink





‘(B) the CPI for the calendar year 2009.CommentsClose CommentsPermalink





‘(3) CPI FOR ANY CALENDAR YEAR- For purposes of paragraph (2), the CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year.CommentsClose CommentsPermalink





‘(4) CONSUMER PRICE INDEX- For purposes of paragraph (3), the term ‘Consumer Price Index’ means the last Consumer Price Index for all-urban consumers published by the Department of Labor. For purposes of the preceding sentence, the revision of the Consumer Price Index which is most consistent with the Consumer Price Index for calendar year 1986 shall be used.CommentsClose CommentsPermalink





‘(5) ROUNDING- If any increase determined under paragraph (1) is not a multiple of $10, such increase shall be rounded to the next highest multiple of $10.CommentsClose CommentsPermalink





‘(g) Marital Status- For purposes of this section, marital status shall be determined under section 7703.CommentsClose CommentsPermalink

‘SEC. 60B. TAX IMPOSED ON BUSINESS ACTIVITIES.

‘(a) Tax Imposed- There is hereby imposed on every person engaged in a business activity who makes an election to be taxed under this part a tax equal to--CommentsClose CommentsPermalink





‘(1) 19 percent of the business taxable income of such person for such taxable year in the case of the first 2 taxable years of the individual beginning with the taxable year for which the election is made, andCommentsClose CommentsPermalink





‘(2) 17 percent of the business taxable income of such person for such taxable year in the case of all taxable years subsequent to the taxable years described in paragraph (1).CommentsClose CommentsPermalink





‘(b) Liability for Tax- The tax imposed by this section shall be paid by the person engaged in the business activity, whether such person is an individual, partnership, corporation, or otherwise.CommentsClose CommentsPermalink





‘(c) Business Taxable Income- For purposes of this section--CommentsClose CommentsPermalink





‘(1) IN GENERAL- The term ‘business taxable income’ means gross active income reduced by the deductions specified in subsection (d).CommentsClose CommentsPermalink





‘(2) GROSS ACTIVE INCOME-CommentsClose CommentsPermalink





‘(A) IN GENERAL- For purposes of paragraph (1), the term ‘gross active income’ means gross receipts from--CommentsClose CommentsPermalink





‘(i) the sale or exchange of property or services in the United States by any person in connection with a business activity, andCommentsClose CommentsPermalink





‘(ii) the export of property or services from the United States in connection with a business activity.CommentsClose CommentsPermalink





‘(B) EXCHANGES- For purposes of this section, the amount treated as gross receipts from the exchange of property or services is the fair market value of the property or services received, plus any money received.CommentsClose CommentsPermalink





‘(C) COORDINATION WITH SPECIAL RULES FOR FINANCIAL SERVICES, ETC- Except as provided in subsection (e)--CommentsClose CommentsPermalink





‘(i) the term ‘property’ does not include money or any financial instrument, andCommentsClose CommentsPermalink





‘(ii) the term ‘services’ does not include financial services.CommentsClose CommentsPermalink





‘(3) EXEMPTION FROM TAX FOR ACTIVITIES OF GOVERNMENTAL ENTITIES AND TAX-EXEMPT ORGANIZATIONS- For purposes of this section, the term ‘business activity’ does not include any activity of a governmental entity or of any other organization which is exempt from tax under this chapter.CommentsClose CommentsPermalink





‘(d) Deductions-CommentsClose CommentsPermalink





‘(1) IN GENERAL- The deductions specified in this subsection are--CommentsClose CommentsPermalink





‘(A) the cost of business inputs for the business activity,CommentsClose CommentsPermalink





‘(B) wages (as defined in section 3121(a) without regard to paragraph (1) thereof) which are paid in cash for services performed in the United States as an employee, andCommentsClose CommentsPermalink





‘(C) retirement contributions to or under any plan or arrangement which makes retirement distributions (as defined in section 63(c)) for the benefit of such employees to the extent such contributions are allowed as a deduction under section 404.CommentsClose CommentsPermalink





‘(2) BUSINESS INPUTS-CommentsClose CommentsPermalink





‘(A) IN GENERAL- For purposes of paragraph (1), the term ‘cost of business inputs’ means--CommentsClose CommentsPermalink





‘(i) the amount paid for property sold or used in connection with a business activity,CommentsClose CommentsPermalink





‘(ii) the amount paid for services (other than for the services of employees, including fringe benefits paid by reason of such services) in connection with a business activity, andCommentsClose CommentsPermalink





‘(iii) any excise tax, sales tax, customs duty, or other separately stated levy imposed by a Federal, State, or local government on the purchase of property or services which are for use in connection with a business activity.CommentsClose CommentsPermalink





Such term shall not include any tax imposed by chapter 2 or 21.CommentsClose CommentsPermalink





‘(B) EXCEPTIONS- Such term shall not include--CommentsClose CommentsPermalink





‘(i) items described in subparagraphs (B) and (C) of paragraph (1), andCommentsClose CommentsPermalink





‘(ii) items for personal use not in connection with any business activity.CommentsClose CommentsPermalink





‘(C) EXCHANGES- For purposes of this section, the amount treated as paid in connection with the exchange of property or services is the fair market value of the property or services exchanged, plus any money paid.CommentsClose CommentsPermalink





‘(e) Special Rules for Financial Inter-Mediation Service Activities- In the case of the business activity of providing financial intermediation services, the taxable income from such activity shall be equal to the value of the intermediation services provided in such activity.CommentsClose CommentsPermalink





‘(f) Exception for Services Performed as Employee- For purposes of this section, the term ‘business activity’ does not include the performance of services by an employee for the employee’s employer.CommentsClose CommentsPermalink





‘(g) Carryover of Credit-Equivalent of Excess Deductions-CommentsClose CommentsPermalink





‘(1) IN GENERAL- If the aggregate deductions for any taxable year exceed the gross active income for such taxable year, the credit-equivalent of such excess shall be allowed as a credit against the tax imposed by this section for the following taxable year.CommentsClose CommentsPermalink





‘(2) CREDIT-EQUIVALENT OF EXCESS DEDUCTIONS- For purposes of paragraph (1), the credit-equivalent of the excess described in paragraph (1) for any taxable year is an amount equal to--CommentsClose CommentsPermalink





‘(A) the sum of--CommentsClose CommentsPermalink





‘(i) such excess, plusCommentsClose CommentsPermalink





‘(ii) the product of such excess and the 3-month Treasury rate for the last month of such taxable year, multiplied byCommentsClose CommentsPermalink





‘(B) the rate of the tax imposed by subsection (a) for such taxable year.CommentsClose CommentsPermalink





‘(3) CARRYOVER OF UNUSED CREDIT- If the credit allowable for any taxable year by reason of this subsection exceeds the tax imposed by this section for such year, then (in lieu of treating such excess as an overpayment) the sum of--CommentsClose CommentsPermalink





‘(A) such excess, plusCommentsClose CommentsPermalink





‘(B) the product of such excess and the 3-month Treasury rate for the last month of such taxable year,CommentsClose CommentsPermalink





shall be allowed as a credit against the tax imposed by this section for the following taxable year.CommentsClose CommentsPermalink





‘(4) 3-month TREASURY RATE- For purposes of this subsection, the 3-month Treasury rate is the rate determined by the Secretary based on the average market yield (during any 1-month period selected by the Secretary and ending in the calendar month in which the determination is made) on outstanding marketable obligations of the United States with remaining periods to maturity of 3 months or less.CommentsClose CommentsPermalink

‘SEC. 60C. TAX ON NONCASH COMPENSATION PROVIDED TO EMPLOYEES NOT ENGAGED IN BUSINESS ACTIVITY.

‘(a) Imposition of Tax- There is hereby imposed on every employer of an employee to whom this section applies and who makes an election to be taxed under this part a tax equal to--CommentsClose CommentsPermalink





‘(1) 19 percent of the value of excludable compensation provided during the calendar year by the employer for the benefit of employees to whom this section applies in the case of the first 2 calendar years beginning with the calendar year for which the election under section 60 is made, andCommentsClose CommentsPermalink





‘(2) 17 percent of such excludable compensation during the calendar year in the case of all calendar years subsequent to the calendar years described in paragraph (1).CommentsClose CommentsPermalink





‘(b) Liability for Tax- The tax imposed by this section shall be paid by the employer.CommentsClose CommentsPermalink





‘(c) Excludable Compensation- For purposes of subsection (a), the term ‘excludable compensation’ means any remuneration for services performed as an employee other than--CommentsClose CommentsPermalink





‘(1) wages (as defined in section 3121(a) without regard to paragraph (1) thereof) which are paid in cash,CommentsClose CommentsPermalink





‘(2) remuneration for services performed outside the United States, andCommentsClose CommentsPermalink





‘(3) retirement contributions to or under any plan or arrangement which makes retirement distributions (as defined in section 63(c)).CommentsClose CommentsPermalink





‘(d) Employees to Whom Section Applies- This section shall apply to an employee who is employed in any activity by--CommentsClose CommentsPermalink





‘(1) any organization which is exempt from taxation under this chapter, orCommentsClose CommentsPermalink





‘(2) any agency or instrumentality of the United States, any State or political subdivision of a State, or the District of Columbia.’.CommentsClose CommentsPermalink





(b) Clerical Amendment- The table of parts for subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:CommentsClose CommentsPermalink

‘Part VIII. Freedom Flat Tax.’.

(c) Effective Date- The amendments made by this title shall apply to taxable years beginning after December 31, 2009.CommentsClose CommentsPermalink

SEC. 3. REPEAL OF ESTATE AND GIFT TAXES.

(a) In General- Subtitle B of the Internal Revenue Code of 1986 is hereby repealed.CommentsClose CommentsPermalink





(b) Effective Date- The repeal made by subsection (a) shall apply to the estates of decedents dying, and gifts and generation-skipping transfers made, after December 31, 2009.CommentsClose CommentsPermalink

SEC. 4. SUPERMAJORITY REQUIRED TO CONSIDER REVENUE MEASURE.

A bill, joint resolution, amendment to a bill or joint resolution, or conference report that--CommentsClose CommentsPermalink





(1) includes an increase in the rates of tax specified in section 60A(a) or 60B(a) of the Internal Revenue Code of 1986 (as amended by this Act), orCommentsClose CommentsPermalink





(2) reduces the standard deduction, as defined in section 60A(c) of such Code (as so amended), or the deductions specified in section 60B(d) of such Code (as so amended),CommentsClose CommentsPermalink





may not be considered as passed or agreed to by the House of Representatives or the Senate unless so determined by a vote of not less than two-thirds of the Members of the House of Representatives or the Senate (as the case may be) voting, a quorum being present.CommentsClose CommentsPermalink