HR 1040 — Flat Tax Act

Summary

Flat Tax Act This bill amends the Internal Revenue Code to authorize an individual or a person engaged in business activity to make an irrevocable election to be subject to a flat tax (in lieu of the existing income tax provisions) of 19% for the first two years after an election is made, and 17% thereafter. The bill calculates taxable income for individual taxpayers by subtracting a basic standard deduction and an additional standard deduction for each dependent from the total of wages, retirement distributions, and unemployment compensation. "Business taxable income" is gross active income reduced by certain deductions for the cost of business inputs, wages, and retirement contributions. The bill imposes an employer tax on the value of excludable compensation provided to employees not engaged in business activity of 19% for the first two years after an election is made under this bill and 17% thereafter. The bill also repeals the estate, gift, and generation-skipping transfer taxes. A two-thirds vote of the House of Representatives and the Senate is required to increase the flat tax rate proposed by this bill or to reduce the amount of the standard deduction or business-related deductions allowed by this bill.

Bill Text

• Introduced Introduced in House Current html February 14, 2017

From the bill's own amending language, matched to the official United States Code (current through Public Law 119-124).

Also cites: 26 U.S.C. § 102

AI-generated reading aid from the bill's amendatory text — verify against the official bill.

This bill introduces a flat tax alternative to the existing income tax system under the Internal Revenue Code of 1986.

• Subchapter A of chapter 1 of the Internal Revenue Code of 1986

  PART VIII--THE FLAT TAX Sec. 60. Irrevocable election to be subject to flat tax. Sec. 60A. Tax imposed on individuals. Sec. 60B. Tax imposed on business activities. Sec. 60C. Tax on noncash compensation provided to employees not engaged in business activity.

  Establishes a new part in the tax code that outlines the flat tax system.

• Section 1

  Except as provided in paragraph (2), in lieu of the tax imposed by sections 1 (relating to tax imposed) and 55 (relating to alternative minimum tax imposed), under regulations prescribed by the Secretary, an individual may make an irrevocable election to be subject to the tax imposed by this part.

  Allows individuals to choose an irrevocable flat tax option instead of the current tax structure.

• Section 60A

  There is hereby imposed on the taxable income of every individual who makes an election to be subject to this part a tax equal to-- (1) 19 percent of the taxable income of such individual for such taxable year in the case of the first 2 taxable years of the individual beginning with the taxable year for which the election is made, and (2) 17 percent of the taxable income of such individual for such taxable year in the case of all taxable years subsequent to the taxable years described in paragraph (1).

  Imposes a flat tax rate of 19% for the first two years and 17% thereafter on individuals who elect this option.

• Section 60B

  There is hereby imposed on every person engaged in a business activity who makes an election to be taxed under this part a tax equal to-- (1) 19 percent of the business taxable income of such person for such taxable year in the case of the first 2 taxable years of the person beginning with the taxable year for which the election is made, and (2) 17 percent of the business taxable income of such person for such taxable year in the case of all taxable years subsequent to the taxable years described in paragraph (1).

  Imposes a flat tax rate of 19% for the first two years and 17% thereafter on businesses that choose this tax structure.

• Section 60A(c)(2)(A)

  The basic standard deduction is-- (A) $32,496 in the case of-- (i) a joint return, or (ii) a surviving spouse (as defined in section 2(a)), (B) $20,739 in the case of a head of household (as defined in section 2(b)), and (C) $16,248 in the case of an individual-- (i) who is not married and who is not a surviving spouse or head of household, or (ii) who is a married individual filing a separate return.

  Defines the standard deductions applicable under the flat tax system.

• Section 60A(c)(3)

  For purposes of paragraph (1), the additional standard deduction is $6,998 for each dependent (as defined in section 152) who is a qualifying child (as defined in section 152(c)(1)) for the taxable year and who is not required to file a return for such taxable year.

  Establishes additional standard deductions for dependents under the flat tax system.

Action History

1. February 14, 2017

   Introduced in House

2. February 14, 2017

   Introduced in House

3. February 14, 2017

   Referred to the Committee on Ways and Means, and in addition to the Committee on Rules, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

4. February 14, 2017

   Referred to the Committee on Ways and Means, and in addition to the Committee on Rules, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

5. February 14, 2017

   Referred to the Committee on Ways and Means, and in addition to the Committee on Rules, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

Sponsors

• Michael C. Burgess · Primary
• Blake Farenthold · Cosponsor
• Pete Sessions · Cosponsor
• Mark Sanford · Cosponsor

Subjects