May 13 2003


U.S. Senator Richard Shelby (R-AL) introduced S. 1040, the “Freedom and Fairness Restoration Act of 2003.” This bill would repeal the current Internal Revenue Code and replace it with a flat tax rate that would apply to all taxpayers.

Like President Bush’s plan, S.1040 eliminates the double taxation of dividends, but it goes further by creating a single tax rate for all taxpayers – seventeen percent when the tax is fully implemented. The legislation would also eliminate the many marginal rates, all itemized deductions and credits, the alternative minimum tax, and the taxation of Social Security benefits. In place of itemized deductions, each taxpayer would be given a standard deduction of $12,790, or $25,580 in the case of a couple filing jointly. Taxpayers would receive an additional $5,510 standard deduction for each dependant. Therefore, a family of four would need to make over $36,600 before they would pay a single penny of taxes.

Sen. Shelby said, “Were a flat tax in place now, taxpayers would file a return the size of a postcard, and every American would be taxed equally and at the same rate. Rather than spending hours poring over convoluted IRS forms, or resorting to professional tax assistance, the flat tax allows taxpayers to determine their taxes quickly and easily. The flat tax would decrease the cost of compliance to the government, and would save taxpayers time and money.”