Kansas Senator Suggests DC Become Laboratory For Federal Flat Tax

by Mike Godfrey, Tax-News.com, Washington

10 March 2006

Senator Sam Brownback, the Kansas Republican, has floated the idea of introducing a flat tax in the District of Columbia to serve as a testing ground and potentially gain support for a federal flat tax, an option rejected by the presidential advisory panel for tax reform.

Brownback's flat tax plan would be a voluntary alternative to the current federal tax structure for District residents. The District’s local tax structure would be unaffected by the new tax.

Chairing a hearing of the Appropriations Subcommittee on the District of Columbia on Wednesday, Brownback stated that: “I believe that a flat federal income tax would create more economic activity and jobs in the District, which would enhance the District’s ability to raise revenue while actually lowering its own high local taxes."

The committee discussed a flat tax rate that would be applied to income earned above an exemption level based on family size. Such an exemption level could be somewhere between $5,000 and $7,000 for each member of the household. With this higher exemption level, a couple with two children earning $28,000 per year would pay no federal income tax at all.

Brownback continued:

“Those who want to stay under the current system would be free to do so. I think, however, that if people are given a chance, they will abandon the current burdensome system."

“A benefit of a flat tax is that it removes the double-taxation on money saved or invested. I do not think that dollars on which wage earners have already paid taxes should be taxed again when those dollars are saved or invested. This double-taxation creates a disincentive to saving and investing.”

Brownback's ideas have met with a mixed reception from politicians and commentators. Daniel J. Mitchell of libertarian think-tank, The Heritage Foundation stated that the city of Washington would enjoy a "much faster" rate of economic growth under the system, which would in turn help to "break through the special-interest log-jam" in Congress and persuade lawmakers that a federal flat tax might be a good idea.

However, Paul Strauss, Washington's non-voting delegate to the Senate derided the "experiment" and likened Brownback to more of a "mad scientist than economic reformer".

President Bush's tax reform panel, which presented its recommendations to Treasury Secretary John Snow last November, stopped short of recommending the imposition of a flat tax, instead offering two plans that would streamline the number of income tax brackets and do away with a number of deductions that tend to obfuscate the system and distort economic activity.

Treasury Secretary John Snow, who continues to mull the panel's ideas, is charged with advising the president on the best way forward regarding tax reform.

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