Freedom Flat Tax Act

Mr. Speaker, here we are 5 weeks from the time that we all have to file our income taxes--April 17 this year. It's 99 years since this House enacted the progressive income tax that we now all know by its familiar names that we all use for it. I thought it might be appropriate to spend some time this evening talking about our Tax Code and talking about what might be possible in fundamental reform of the Tax Code.

I have long been a proponent of what is known as a flat tax. I think that is something that is worthy of this House taking up and debating. There is legislation that has been introduced, H.R. 1040 for people who are keeping score at home, and I think this would be a rational approach for people who want to be treated fairly by the Tax Code--our President does talk about fairness in the Tax Code--and for people who are wanting to get out of the tyranny of having to live with a shoe box full of receipts every spring, because I know this weekend when I go home, I'm going to be spending some time with that shoe box of receipts.

The flat tax is an idea that was promulgated by my predecessor here in this House, the former majority leader, Dick Armey. He wrote a book about the flat tax in 1995. I've read it, I embraced it, and I thought it was some of the smartest economic policy I had ever read because I had just lived through what I described as the Clinton paradox.

In 1993, President Bill Clinton, in his first year of office, earned almost an identical amount of money that I earned in my medical practice back in Texas. Now, when the taxes were filed and the reports were given on how much Mr. Clinton had paid that year, he returned about 20 percent of his income in the taxes that he paid. We had earned an identical amount. When I did the same calculation on myself, it was 32 percent. Why should two people who had an identical earning level pay vastly different amounts on their income tax?

The fundamental unfairness of the system as it existed--better accountant, just simply differences in math, why should it account for that type of discrepancy?

So this is a concept that I came to Congress and wanted to push. I have been anxious for this Congress to enter into the debate on fundamental tax reform. I am somewhat encouraged during the Presidential debates that we've heard over the past several months that Presidential candidates have been talking about fundamental tax reform, and the President himself has mentioned creating increased fairness in the Tax Code.

I'm all for that. I think that this is one way that this House could entertain at least having the debate and perhaps provide a way forward for a more sensible structuring of the payment of income taxes in this country.

I'm so very happy tonight to be joined by another Member. Allen West of Florida has agreed to speak with us during this hour and share with us his thoughts on fundamental tax reform.

I yield to the gentleman from Florida (Mr. West).

Well, very good. I hope the gentleman will stick around. I've got a few points I want to make, but at any point you feel like you want to expand upon something, please feel free to join back in.

We often hear the saying that there's nothing in this world that's certain except death and taxes; they're both unavoidable. I will tell you, as a practicing physician for 25 years back in Texas, sometimes death seems a little less complicated than our Tax Code.

But again, I draw your attention to H.R. 1040. This is an optional flat tax bill that I have introduced this year--and really for several Congresses now. It does have a number of cosponsors. We are yet to get to ramming speed, as the gentleman pointed out, but I think

with the additional emphasis that has been placed on fundamental tax reform by the Simpson-Bowles Commission, by the Republican Presidential debates, I think this is a debate in which the American people are anxious to participate.

Here's an interesting quote, and it's so interesting that I had a poster made of it. The tax system is so complicated that even IRS Commissioner Doug Shulman has said, ``I find the Tax Code complex, so I use a preparer.'' Wow, the very guy who's in charge of the whole shindig cannot do his own taxes, so he has to hire it out.

So if this learned individual, who is the IRS Commissioner, cannot figure out how to do his own income taxes without a preparer, how in the world is the average Joe supposed to be able to figure this out? I ask that question because I've used this quote for a couple of years. Then last weekend, in The Dallas Morning News, I was struck by this quote, an article where just a regular small business woman was interviewed about how she could possibly file her income taxes, which she didn't understand. She told The Dallas Morning News reporter:

I don't care what the IRS says, it's complicated. It's much

more confusing than I understand. We don't know what we're

going to do.

Now, I don't know what this says to you, but it certainly says to me: Time for a change.

I yield to the gentleman.

I think the result would be absolutely outstanding. One of my wishes is that I live long enough to see that glorious day when the chains are taken off the American economy, the chains imposed by the Tax Code.

I actually wasn't going to bring up some of our esteemed heads of Federal agencies, even the esteemed heads of congressional committees last year charged with writing the laws that govern what other Americans are having to pay in their taxes. These individuals simply could not comply because it was too complicated. The very individual who was in charge of the committee with writing the tax laws found himself afoul of those same laws. The very head of the U.S. Department of the Treasury found himself afoul of some of the Tax Code because, again, he alleged the complexity in the system.

So the Tax Code has grown by so much since it was introduced some 99 years ago. When it was first created that infamous year, the Tax Code comprised a total of 400 pages. As the gentleman from Florida just mentioned, it has grown to almost 70,000 pages.

Remember, one of the fundamental tenets of the American legal system, including the tax system, is that ``ignorance of the law is no excuse.'' Therefore, theoretically, every single American who is merely trying to comply with the law and get their taxes filed by April 17 this year is required to be familiar with 70,000 pages of tax rules.

Now, I don't do my own taxes. I don't trust myself to do my own taxes. I know I'm not smart enough. With four college degrees, I couldn't possibly handle this. But I doubt that even the tax attorney that I employ at great expense is familiar with all 70,000 pages, let alone the single mom back in Dallas, Texas, that I referenced.

The complexity of the Tax Code is a consequence of countless deductions and exemptions aimed at steering a social agenda. That might surprise some people. The Tax Code is used to steer a social agenda. But it's supposed to be a Tax Code.

So what does that mean?

It means that the special interests are running rampant in the Code. Any time Congress wants to punish or reward--we call it incent behavior--we add either a credit or a tax to the IRS code. An example of this would be the, say, 23 new taxes that were included in the Affordable Care Act.

Let me pause for just a minute. I get a lot of criticism from people who say: You're a doctor. You should have been for health care reform. But the bill that was signed by the President 2 years ago this March was not a health care bill; it was a tax bill.

Now, how do I know that?

I know that because, of course, the House passed its own bill on health reform, but when the Senate passed a bill on health reform, it wasn't the bill the House had worked on. It was not H.R. 3200. H.R. 3200 passed in this house November 9, 2009, and it immediately went to the dustbin of history. The bill that ultimately became the Affordable Care Act was called H.R. 3590, and it passed the Senate famously on Christmas Eve.

Oh, wait a minute. It was the Senate. Why was it a House bill number? Interestingly, H.R. 3590 started life as a housing bill, a bill to deal with veterans housing. It passed this House in July of 2009. I think I voted against it. I honestly don't remember. But H.R. 3590 had not one word about health care; it had not one word about taxes.

It goes over to the Senate, sits in the hopper, gets picked up by the Senate majority leader when he needed a vehicle to put a health care bill through the House. But he knew that it was fundamentally a tax bill and not a health care bill, so it had to originate in the House of Representatives.

So here's a convenient bill number, H.R. 3590. Amend it, strip all the housing language out of it, and then you start putting the health care language in it. That's how we get a health care bill that is really a tax bill passed initially by the Senate and then subsequently ratified by the House in March of 2010.

It was a dreadful process; and for anyone who remembers those days, it was certainly some pretty dark dealing from the bottom of the deck, and that's why the health care bill has been so unpopular. It was unpopular when it passed, and it stays unpopular to this day. And I hope that we are going to be able to get something done about it, if not this year, then next.

But back to the Tax Code. Twenty-three new taxes in the Affordable Care Act because, again, Congress wants to punish their enemies or reward their friends.

Well, how do you figure special interests like ethanol and the special treatment they get in the Tax Code?

The results of these actions is a compilation of laws fraught with opportunities for, yes, avoiding taxes, but also perhaps just simply making a mistake or not understanding all of the loopholes. And all of this, then, comes down to the expense of fellow Americans.

Now, everyone's familiar with the problems of the Tax Code. We all criticize it. It's almost like an American pastime to do that. But here are some interesting facts that further demonstrate why we need fundamental tax reform.

I yield to the gentleman from Florida.

That's absolutely correct.

Here's a few fun facts that I've compiled over the years on the income tax code. Each year, America spends 6.1 billion hours preparing their tax form. It turns out that's 254 million days. Who knew?

The cost of compliance for Federal taxpayers filling out their returns and related chores was $163 billion in 2008. That's 11 percent of all income tax receipts. Think about that just for a moment. We could have an 11 percent increase in revenue to the Federal Treasury if these costs were not incurred.

The Tax Code has grown so long that it's become challenging even to figure out how long it is. A search of the Tax Code in 2010 turned up 3.8 million words. A 2001 study published by the Joint Commission on Taxation put the number at 1.3 million words. A 2005 report put the number of words had almost tripled since 1975. Such is the pace, the rate, at which new regulations are being added.

A study done in 1998, when the forms were even less complicated, was surveyed by 46 tax experts. They kind of ran some hypothetical numbers on a hypothetical earning, and each expert came up with 46 different answers from 46 tax experts when determining tax liability. The calculations ranged from a low of $34,000 to a high of $68,000. The one who directed the test even stated that his computation is not the only possible correct answer. And yet we are asking our fellow Americans, our fellow citizens, to make this same type of leap of faith every year when they fill out these forms.

They don't want to be non-tax compliant. They don't want to be perhaps afoul of the law. But the problem is it is so complicated that they literally have no choice.

Well, they might spend it on goods and services produced by other Americans, which would help their businesses; or they might reinvest it in their own business and perhaps hire a new person, even with the threat of the health care act hanging over their heads.

The Tax Foundation estimated in 2007 that the average person spends 79 days working to pay their Federal taxes, another 41 days for their State and local taxes. To pay the Federal taxes is more than people pay in health care, housing, and transportation.

You can kind of see the return on investment for those other areas, but I'm not quite sure that people see the return on investment as they're forced to pay their Federal income taxes. We all complain about paying taxes; but the fact is, if the system was fair and simple, it would be easier to take.

Now, Americans don't mind paying for roads. They don't mind paying for a strong defense or for health care. But if the family who lives next door is paying a smaller share of the tax burden than you, living right next door, are forced to pay at a higher rate just because they have a better accountant, that simply doesn't make sense to people.

The Declaration of Independence states that all men are created equal, and I believe that should apply to our Tax Code.

Time is precious. All of us don't have enough time to do all of the things that are in our daily living. We've got to earn a living, raise our family, discipline our kids, spend time with friends.

And then the dollars-and-cents side of the equation, where time is money, valuable resources are squandered navigating the tax laws instead of growing the economy and instead of creating jobs.

Taken together, this is a strong prescription for real change in our Tax Code. And the good news is we know it works. We've seen it before. We caught a glimpse of it in 1986 when Ronald Reagan cut the Code in half. As a result of that reform, the economy grew, revenues increased, jobs were created.

I can't think of a better prescription for our economy than replicating the reform of the Tax Code on an even greater scale.

So what to do? To me, the prescription is very simple. Flatten the tax, broaden the base, shift the burden away from families and small businesses. Simplify the Tax Code and make it easier for businesses and families to use.

Now, even the National Taxpayer Advocate, Nina Olson, repeatedly states simplification of the Tax Code as one of her recommendations to her annual report to Congress. In 2009 she was quoted as saying, the complexity of the Code leads to perverse results. On one hand, taxpayers who honestly seek to comply with the law can make inadvertent errors, causing them to either overpay their tax, or to become the subject of an IRS enforcement action for mistaken payments of tax. On the other hand, sophisticated taxpayers often find loopholes that enable them to reduce or eliminate their tax liability.

Now, look, this is the National Taxpayer Advocate, and she thinks it's best for our constituents if we simplify the system. So it makes sense for Members of Congress to take up that sentiment and work toward that goal.

Mr. West, I can assure you your constituents and my constituents already know that.

Just a few years ago, a group called American Solutions conducted a nationwide poll on different topics relating to the Tax Code and on taxes and jobs. They crossed gender, ethnicity, economic, and party lines and discovered the following interesting facts about America:

The majority of people in America, 69 percent to 27, think the American tax system is unfair;

A majority believe that the death tax should be abolished, 65 percent;

A majority favor tax incentives for companies who keep their headquarters in the United States of America, 70 to 26;

Taxpayers should be given the option of a single income tax rate of 17 percent;

Taxpayers would still have the option of filing their taxes in the current system if they chose to do so. That was a 61 percent favorable;

The option of a single-rate system should give taxpayers the convenience of filing their taxes on a single sheet of paper. Guess what. That one was 82 percent of our constituents believe, our fellow Americans, believe they should be able to file their Federal income taxes on a single sheet of paper.

America has spoken. The evidence is clear, and we need real change in our tax system. The encouraging news is that we do have a practical and effective blueprint for making this change across the board. The blueprint, of course, is the flat tax.

In 1981, Robert Hall proposed a new and radically simple structure that would transform the Internal Revenue Service and our economy by creating a single rate of taxation for all Americans. Today, several States with their State income taxes have implemented single-rate tax structures for their State income taxes. From Utah to Massachusetts, citizens are seeing the benefit. In Colorado, a single tax rate generated so much income that the revenue--that lawmakers were actually able to reduce rates. In Indiana, the economy boomed after a single rate went into effect in 2003, and the following 3 years the corporate tax receipts rose by 250 percent.

Here in Congress, there is no shortage of champions who've worked on the problem. I've been involved in this for a number of years, but prior to my coming here, Congressman David Dreier of California, the chairman of the Rules Committee, has spent a number of years working on this concept. Paul Ryan, our budget chairman, Paul Ryan of Wisconsin, chairman of the Budget Committee, has worked on this problem for a long time. Mike Pence of Indiana, who was our conference chair last term, of course my friend Allen West of Florida, all working to establish a simple tax rate structure for our country.

Other Members are working on this in the Senate as well. And let's be honest: This is a time where Congress is not held in high regard, and this would be a tremendous deliverable for the House and the Senate to work together on simplifying the Tax Code and actually returning not just dollars to the American people, but giving them back their time that we rob from them every year when we enforce compliance with the Tax Code.

Not everyone may agree on precisely where the flat tax rate should be. Seventeen percent, no deductions, is something that's been talked about for some time. I think that is certainly a system that is worthy of study. But if someone else wants to talk about a system with two or three rates or if they want to maintain deductions, we should be able to have that debate. We should have it civilly. It shouldn't be something that we clobber each other over the head about.

But every American should bear this burden equally at the lowest rate possible, and everyone should be able to do their taxes without the help of a professional. People should be confident that when you earn the same income as the person across the street, you pay the same income taxes at the end of that year.

Just by way of comparison, according to the Internal Revenue Service, there are 1.2 million tax professionals preparing taxes during the tax season, which is roughly equal to the population of the State of Hawaii.

There are 950,000 doctors in the United States. Now, as a physician, I think this number is off; it's askew. Healers should not be outnumbered by tax preparers. It makes no sense. More people should go into medicine and less into tax preparation, and it will provide them the simplicity in the Tax Code. Perhaps that can happen.

But let's also be honest. The accountants who do your taxes would much rather be talking to you about your long-term life planning, your planning for your retirement, your planning for covering expenses if you become disabled; they would much rather talk to you about life planning than they would talk to you about how they disrupt your life with the Tax Code.

I yield to the gentleman from Florida.

According to H&R Block, which is one of the major preparers of income taxes in this country, now 60 percent of Americans use some type of preparer for their income tax return, and quite likely that number is going to increase. In 1960, less than a fifth of taxpayers used tax preparers. In 2011, H&R Block garnered $3 billion in tax preparation revenue, up from $1.5 billion, so they doubled in the previous 10 years.

I've got nothing against this company. I think they do a good job. I've got nothing against my own accountant. But it's an indictment of our system when a tax preparer has seen their revenues increase so much, and it really is a shame.

The United States Congress has it within their power to change this, to transform this, and they simply will not do it, and instead they continue to create a system that is so complicated that more than half of the public feel the need to pay someone else just what they owe at the end of the year to Uncle Sam.

I will tell you, it just simply does not have to be this complicated. Let me show you what is possible if we were to transform the system into a simple, single-rate tax.

Here is the form. This is not the long form. It's not the short form. It is simply the tax form. Maybe someone at home should time me, But here you go:

Write in your name, a little bit of identification data, your income, a line for personal exemptions, calculate your deductions from your personal exemptions, your taxable income, and calculate your tax by multiplying by a flat rate, subtract the taxes already withheld, and you're done.

So what did that take? Thirty seconds, a minute if you write slow?

This is not a complicated formula. This is not a complicated scheme, and most people would be able to do this themselves without a lot of outside work or outside preparation. So no more tax preparation bills, no more tax attorney bills. Gone are the hours of stressful research trying to figure out things like how your marital status will affect your return or how many children affect your return. No more headaches in trying to determine where the estimated tax payments go. No more Congress picking one group over another just because they've got a clever lobbyist to advocate on their behalf. Instead, we just deliver a simple system to the American people.

Now, as you have said, a single-rate structure would eliminate the taxes on capital gains, taxes on dividends, taxes

on savings. Those things should only be taxed one time. Personal savings would increase.

I will never forget the time during the prior recession in this country--the savings and loan debacle, the meltdown. I was in solo practice in Texas, and I got worried at one point that I was not going to be able to meet my obligations. As we emerged from that and as cash flow picked up a little bit, I thought, you know, I am going to keep money in certificates of deposit, enough to cover 3 months of operating expenses so that I'll never again have to worry about the dire wolf being at the door. So I did that, and I kept that money there for a couple of years.

What I found out by doing that maneuver is that when that money eventually returned to the partnership and was distributed to the partners, we had paid corporate taxes on it at 38 percent, and then we had paid personal income taxes at 39.6 percent because we were all doing pretty well by that time. Needless to say, my partners were not amused by the fact that I had conjured up a scheme that I had thought would save us from ruin but that, in fact, exposed us to double taxation under the IRS code.

The country of Estonia was a case in point a few years ago when they reported on their experience with the flat tax.

I think this is a good system, but do you know what? I am willing to admit to you that I do not know the best for every family in America. Some people would criticize this system by saying, Well, wait a minute. I need that income tax deduction for my home mortgage. I need that income tax deduction for charitable donations. That may be right; but I do know this, that you should have the option of saying, I accept a single flat-rate tax, and I am going to give up those other deductions.

It should be your option. It should not be the United States Congress that is dictating to each and every American what they shall and shall not do. If you have constructed your life by living around the IRS code, then you should be able to continue doing that. If that is the reason by which you've made economic decisions in your life, you should be able to live by those decisions. Congress should not be disruptive in this process.

I, personally, would give up all of the itemized deductions that I keep in order to get rid of having to keep up with those itemized deductions. Would I still give money to charity? Absolutely. Would I still turn stuff over to the Salvation Army and to Goodwill? Absolutely. It's no fun keeping up with those things and then having to report them to my accountant, and I always worry that I've left something off and that I'm not getting all that's owed to me off of my income tax return.

I would so much rather have a system that was simple and with which, within a few hours every spring, I could be done. The United States gets its money. I get the satisfaction of knowing I've done it correctly, that I'm not going to jail for some perceived misconstruction on the Tax Code, and that no others have gotten a better deal than I have because they were more clever about how they declared those charitable deductions, for example.

Let me give you an example of the mortgage tax deduction, because I do have a lot of friends who are in the real estate business, and they're concerned about losing that home mortgage deduction. It's one of the bedrocks on which the economy has been built over the years:

If you have invested in a starter castle in California and if your house payments are largely of interest and not much of principal, you probably don't want to do this because that number is likely very high; but if you live in Fort Worth or San Antonio, Texas, where the average home mortgage is much, much smaller, if you do the numbers, if you run the numbers, you'll find that the amount of money you actually get to keep from that mortgage income tax deduction is actually fairly modest.

I would give that up in a heartbeat to be out from under the tyranny of the shoebox full of receipts, but I fully understand how some families have made the decision. A home is a pretty important investment. After all, I get to write off the cost of the mortgage home deduction, so I will make this investment in this size of a home. It would be wrong for the United States Congress to say, as of next year, you don't get to do that anymore. The real estate market has already suffered, and it would suffer worse if Congress were to make a sudden decision like that.

So make it optional. You can either stay in the Code and keep doing what you've been doing, or you can evolve and come into the promised land of a flat tax and give up that shoebox full of receipts. The important thing here is it's your choice; it's your option.

Now, I will say that once you opt into the flat tax, you can't go back and forth into the Code and out of the Code depending upon what kind of year you have and what kind of investments you make. Once you make the decision to go into the flat tax, there you'll stay. I fully believe that, even though some people might not do as well under a flat tax system, because it is so much simpler and because it returns time to their lives, they will opt for this; and as a consequence, we will see the number of people participating in the IRS Code dwindle down to an ever-smaller number until, one day, it just vanishes under its own weight and the country is completely freed from the tyranny of the IRS Code.

Our time here has almost concluded.

The gentleman is exactly right. All of the improvements in the Tax Code really become meaningless if we don't reduce the size and scope and the footprint of the Federal Government. You're right about the cranes that are all over town. But after those buildings

are built, let's be honest in that the money invested in the Federal Government doesn't really produce all that much, does it? We don't make things here during the day other than laws and regulations that interfere with other people's lives. We need to have this government smaller and more manageable.

We talk a lot about transparency, and I think transparency is good. The problem is you have something that is so complex, like the IRS Code, that even though you may have the ability to look inside it, you won't know what you're finding when you get there. If you have a system that's as simple as this, people are able to know what their government is costing them and what they are getting from that bond with the government.

If they didn't like that equation, they could change. They could change their Members of Congress; they could change their Senators; they could change their President. That's the beauty of living in the representational Republic that we all know and love here in the United States of America, and it is the thing that, arguably, has made us great--government with the consent of the governed. Wouldn't it be great if that governed knew just exactly what it was costing them, and then perhaps they could find out where those dollars were going.

I mentioned earlier that Budget Committee Chairman Paul Ryan has called for broadening the base and lowering the rates. Obviously, I want to work together with him. Ways and Means Chairman David Camp has promoted the simplification of the Tax Code. The President, himself, through the Bowles-Simpson Commission, talked about it. Whatever the tax proposals are that we look to in the future, we need to remember that a flat-tax system could be less costly, saving the taxpayer over $160 billion a year, reducing tax compliance costs by over 90 percent, with a resulting increase in personal savings.

Here you go. How about a debt-free stimulus package, a gift to the American people, that could have an immediate effect on the American economy. American Solutions looked into this question in 2009: 80 percent of Americans favor an optional one-page tax form with a single rate. Who could complain about making something easier? And we've got 70,000 pages of the Tax Code and more on the way this December when we get through with the so-called ``lame duck session.'' I don't know about you, Mr. West, but it scares me half to death to think about what's coming at the end of this year. The current process comes at a cost that's way too high for the American people and that costs way too much time.

Mr. Speaker, of course, I know I must direct my comments to you. April 17 is coming up. It's rapidly approaching. I know people are focusing and will begin to focus more and more on this issue for what remains of the month of March and the first couple of weeks of April, because they'll be having to arrange their own taxes, deal with their own shoe boxes full of receipts.

This is the time to make the point that it is time to return time and money to the American people. Let's get behind the flat tax.

I yield back the balance of my time.

Well, thank you, my dear colleague, Dr. Burgess of Texas, for allowing me to be here and talk about the reform of our Tax Code.

When you sit back and you look at the progressive Tax Code system that we have here in the United States of America, we hear a lot of talk today about fairness and fair share and economic equality and shared sacrifice. But one of the things we have to come to understand is, when you look at the top 1 percent of wage earners in the United States of America, they're paying close to 40 percent of the Federal income taxes. When you consider the top 5 percent of wage earners in the United States of America, they're paying close to 58 percent of those Federal income taxes. The top 25 percent of wage earners in the United States of America pay 86 percent of the Federal income taxes.

But of course now we're coming to understand that you have a large percentage of Americans--some say it's between 47 to 49 percent--that are paying absolutely nothing in Federal income taxes. It kind of reminds me, my dear colleague, of that movie, ``Ben-Hur,'' when Judah Ben-Hur was sent off to be on the Roman galleys. Of course the commander came down and he said very simply, ``Row well and live, 41.'' Of course we remember that beating.

Well, what happens on that Roman galley if only 25 percent is rowing? That's the situation that we have here in the United States of America. We will never get to ramming speed. We will never fully recover this economy so that we can have the capital that is necessary out there, so that Americans can be able to pay for these exorbitant gas prices, so that small business owners can expand their business.

So I think that now is the time to do exactly what you are talking about: Look at fundamental Tax Code reform so that we can eliminate things such as the death tax; we can eliminate things such as the dividends tax, which a lot of the seniors that I represent down in south Florida and pre-seniors, they depend upon those dividends. Why are we having these exorbitant taxes upon tax?

So I think that this is a great opportunity to have this conversation. I am so honored that you allowed me to stand here and spend some time with you this evening.

You bring up a great point, Representative Burgess. When you look at the fact that we have a Tax Code that is some 67,000 pages--as a matter of fact, the American people know that even some of our colleagues up here on Capitol Hill in this very body, the House of Representatives, have had some issues with the Tax Code, also to include our own Secretary of the Treasury has seemingly had some issues with the Tax Code and the confusing nature of which it exists. So, you're right, I think it's an absolutely important time that we go back and we examine this Tax Code, maybe move away from this progressive Tax Code system and simplify it for the American people.

As you know, if we can bring those rates down, if we can lower the deductions, if we can get rid of a lot of the loopholes on the personal income tax side and also the corporate tax side, think about what we can do for generating economic growth here in America.

And if I can, my colleague.

I'd like to talk about one of the things you just mentioned, how we are using the Tax Code as a weapon for behavior modification. You just brought up exactly one of the things we have to be very concerned about is all of the new taxes that will kick in in the Patient Protection and Affordable Care Act from January 2013 out to January of 2018. One of those taxes even includes a real estate transaction tax.

Now, why would we tax people for going out and selling homes and purchasing homes?

Those are the types of hidden things that you find in that bill, and that's why we need to come back and simplify

this Tax Code so that we don't have politicians using it for a certain ideological agenda.

But there's another unintended consequence that I see occurring down in our district because of this very complicated Tax Code. Now, you have many different shady typed of operators out there that are talking about how they will help prepare that Tax Code.

You know, when you drive by and you see the person spinning the arrow, or dressed up like the Liberty Bell, or something of that nature. And now we're finding that many of these places are rampant with tax fraud, that people are not getting their tax returns back.

Now think about, just as you have recommended, a simplified Tax Code. Think about what is happening with tax fraud that is targeting our seniors so that now you have people that are going trying to file their tax form and they are finding out that someone has already done it under their presumed identity. If we could simplify this, a lot of those unintended consequences would not be happening.

One of the pieces of legislation that we are currently considering is how do we spur on capital for our small businesses. Now, think about what you are recommending, Dr. Burgess, where you look at the personal income tax rate. And right now we have this progressive Tax Code system. What if we were to flat tax that out? One single rate?

Think what that would do for small businesses who operate from that personal income tax rate, subchapter S and LLCs. Think about the fact of how they go from being at the top end, maybe 35, 38 percent of that bracket. Now we bring it down a little bit lower, like you suggest in 1040.

What happens with that capital now we've put back in their pockets? What can they do with those small businesses? What can they do with providing the right types of benefits for their employees? What can they do to expand that business?

That's why what you're bringing up is one of the critical things we have to look at if we are truly going to turn around the economic situation here in America.

You're absolutely right. Our constituents back in south Florida--and of course we get a lot of email from all across the country, and, hopefully, we'll get some of that email tomorrow after this Special Order--but they understand a single flat rate.

All flat tax proposals have a single rate, and usually that single rate is less than 20 percent. That low flat rate solves the problem of a high marginal tax rate by reducing those penalties against productive behavior such as work and risk-taking and entrepreneurship.

Also, you eliminate a lot of those special preferences because flat tax proposals would eliminate provisions of the Tax Code that bestow preferential tax treatment on certain behaviors and activities. Guess what? It reduces that influence of lobbyists up here that you already talked about.

When you get rid of deductions or lower those deductions, credits, exemptions, and other loopholes, that also helps to solve the problems of complexity, allowing taxpayers to file their tax returns on that one simple form. That's why H.R. 1040 is a great step forward.

Thank you once again, dear colleague. You bring up a great point when you talk about your after years, your retirement years.

But I think another thing we need to be considering is: How do we spur on investment in the United States of America? How can we spur on innovation and ingenuity? When you look at the flat tax, then you can get rid of double taxation of savings and investment, because flat tax proposals would eliminate the Tax Code bias against capital formation by ending the double taxation of income that is saved and invested.

This means that we get rid of the death tax. We can get rid of capital gains tax. Definitely, we can reduce it. Most importantly, we get rid of the double tax on dividends.

By taxing income only one time, a flat tax is far easier to enforce and more conducive to the one thing that we need in the United States of America right now: job creation and capital formation. It's all about having the right type of tax policies that emanate out of this body, the House of Representatives, and that's why we have to get behind your proposal.

You're absolutely right.

When you think about last year, our GDP growth over the four quarters of about .4 percent, 1.0 percent, 1.3 percent, and the revised number in the last quarter of 3 percent, that's why, once again, economists will tell you that the two principal arguments for a flat tax are growth and fairness, which you just brought out.

They are attracted to this idea because the current tax system, with exorbitantly high rates and discriminatory taxation on savings and investment, reduces growth; it destroys jobs and it lowers incomes. A flat tax would not eliminate the damaging impact of taxes altogether; but by dramatically lowering rates and by ending the Tax Code's bias against savings and investment, it would boost our economy's performance, especially when we compare it to the present Tax Code.

I think, Dr. Burgess, my dear colleague, if you look at where flat taxes have been instituted, you've seen GDP growth in those countries. So what holds us back from doing something that is just common sense?

You're absolutely right.

I think the most important thing we have to come to understand is that this time belongs to the American people. The money, the resources, belongs to the American people. Let's give them the option to do what is best for them in their lives--the option of going to a flat tax or staying in the current progressive Tax Code system with the options of the mortgage interest tax deduction, the child tax credit, charitable contributions, as we reduce those deductions.

But let's start treating the American people as adults. The key thing that has to accompany this is we have to reduce the size and scope of government as well because, as we start to focus more so on Main Street, as we start to focus more so on the hardworking American taxpayers and what's best for them, then we can have that investment at their level. We can have the growth at their level.

One of the things that really does trouble me is that when you drive around Washington, DC, you see a lot of construction cranes. Business is good up here, which means that there are fewer pockets of the hardworking American workers, that there are fewer pockets of the small business owners; and this is the means by which we unlock that entrepreneurial spirit that will grow this economy.

So that's why I hope that, in this Congress, which is one of the reasons I came here, we do those big reforms that show the American people that we're serious about turning this economy around and that we're serious about creating the right type of policies that set the conditions for job creation.

Thank you so much to my colleague from Texas, Dr. Burgess, and I think the seminal argument is this: We're talking about economic freedom for the American people, as opposed to economic dependency upon government. This incredible, exorbitant system that we have, it is complex to the point where it is causing more pain for the American people and causing them to have the freedom that they deserve.