May 1, 2007
Senator Robert Bennett: Replace Current System with Flat Tax and Consumption Tax
Fundamental tax reform should begin with full repeal of the current payroll and individual income tax systems, according to Senator Robert Bennett of Utah. In their place, he proposes a dual structure consisting of part consumption tax and part flat income tax.
"Congress has amended the basic income tax code every 18 months for the past 70 years. And it is become totally impenetrable," he said. "So instead of trying to understand it, simply repeal it...I want a system that's simple and efficient and competitive in a world economy."
Bennett's remarks came in the most recent Tax Foundation Tax Policy Podcast (listen). The senator discussed tax reform, entitlement reform and the challenges Congress and the country face in the years ahead.
"We're dealing with a system that was designed 70 years ago with a set of demographic circumstances that were completely unforeseen," he said. He added that the framework of the debate must be moved from shrill taunts and cheap political shots to a substantive discussion of how to address the problem that lies just around the corner.
He said his plan would raise half of the needed revenue through a consumption tax and the other half through a flat tax on income. "It's simple. It's efficient. And it's competitive."
Despite the dire warnings from budget forecasters, Senator Bennett also believes a solution to entitlement reform can be forged. For example, he recommends leaving current Social Security benefits the same for low-income earners and indexing benefits for top earners at the same rate as the consumer price index.
"My plan has been scored by the Social Security Trustees and they've said it solves 100 percent of the problem," he announced. "We put this thing together, worked it out, laid it out and they've looked it over and said ‘you adopt this, Social Security goes away as a problem.'"
He added: "We can make this thing work."
The interview is Number 26 in the Tax Foundation's podcast series. It's available online here.
The Tax Foundation Tax Policy Podcast features interviews that shed light on the nation's tax system. Best known for its annual calculation of Tax Freedom Day®, the Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
