They are also temporary. The Bush income tax cuts expire at the end of 2010 and the dividend and capital gains cuts expire at the end of 2008. The president wants to make them permanent; supporters of such a move say the current situation fosters uncertainty that could damage the long-term growth of the economy, while sending mixed messages to the investment community. While many consider making the cuts permanent a drastic step, it would appear tame
in comparison to the radical, systemic reforms currently bandied about. One recurring idea made popular by Armey is to tax everyone at a flat income tax rate of 17 percent, while eliminating almost all deductions. Armey proposed such a system in the early 1990s, and buttressed his argument by theatrically waving about a 10-line, postcard-size tax return. He said it would dramatically simplify the filing process and reduce the cost of compliance by nearly $550 billion per year. In 1996, several politicians introduced their own flat-tax bills, and in 2000, magazine publisher Steve Forbes made the flat tax part of a pillar of his failed presidential bid.
The goal of the flat tax is to create a more efficient system that promotes savings and investment by eliminating levies on income from savings, capital gains and interest. Most flat-tax proposals would also allow businesses to deduct the cost of investments from their revenues immediately, instead of adhering to the complex depreciation schedule they currently use. This, its proponents claim, would free capital for reinvestment.
Flat-tax opponents dislike the fact that it eliminates popular deductions, such as those for mortgage interest and charitable donations. It would also eliminate corporate deductions for benefits such as health and life insurance and social security.
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