DeMint Introduces Taxpayer Choice Act, Will Offer as Amendment to AMT Bill

Press Release

DeMint Introduces Taxpayer Choice Act, Will Offer as Amendment to AMT Bill

Today, U.S. Senator Jim DeMint (R-South Carolina) introduced legislation that would stop a massive tax hike on millions of middle-income taxpayers give taxpayers the option of a simpler, fairer alternative to the complex IRS tax system. The legislation, known as the Taxpayers Choice Act (TCA), would repeal the alternative minimum tax (AMT) and establishes a highly simplified alternative to the current individual income tax.

The proposal is identical to the proposal introduced by Representatives Jeb Hensarling (R-TX), Paul Ryan (R-WI), John Campbell (R-CA), and Michele Bachmann (R-MN). Currently, the House bill has 83 cosponsors.

"As the Senate considers AMT relief for middle-class America, we should seize the opportunity to change the debate in Washington," said DeMint. "For far too long politicians in Washington have put the government first, and now is the time we turn the tables and put Americans first. We must permanently repeal the AMT to ensure middle class families are never hit with this massive tax hike. And we must also finally allow taxpayers a choice to leave the incredibly complicated IRS tax code. The Taxpayers Choice Act will create a fairer and more equitable option for all Americans. This plan would allow every American to choose the system that is best for them, spur economic and job growth, and ensure no one is given special advantages."

When the AMT was created in 1969, as a mandatory add-on to the existing tax code, it was aimed at preventing 155 wealthy taxpayers from exploiting loopholes in the tax code to escape their legitimate tax obligations. However, partly because it was never indexed for inflation, the AMT next year will subject close to 30 million more taxpayers to an automatic tax increase. The legislation that Senator DeMint has introduced will prevent many middle-income Americans who dutifully pay their taxes from being strapped with a stealth tax increase that was never intended. The bill would also offer people the choice of an alternative tax system that is transparent, simple and efficient.

Unlike many other AMT "reforms," this plan does not increase taxes on any American. It also retains a fair distribution and equitable distribution of federal tax burdens. Above all, this plan offers a choice: taxpayers can choose the new system or stay with the current tax code. They have the freedom to select the option that best suits their particular circumstances.

"The AMT was never intended to place an ever-growing burden on law-abiding, middle-income taxpayers. Congress should get rid of this unfair tax before it automatically raises the tax bills of even more working Americans," Rep. Paul Ryan said. "Our tax reform proposal lets us repeal the AMT once and for all, while giving taxpayers the option to choose a much simpler income tax system that will make the tax code easier to navigate and more efficient. It's encouraging that Senator DeMint is fighting to put the taxpayer first - not the government - when the Senate considers the AMT issue."

"The Republican Study Committee's Taxpayer Choice Act guarantees that middle class American families are protected from the massive and unforeseen tax increase that the current AMT will soon impose upon them by fully repealing the AMT for all Americans and, it provides them with the choice and opportunity to become part of a 21st Century tax system that is fair, simple, efficient and, above all, accountable," said Rep. Hensarling. "Though Democrats campaigned last year on promises to reform or repeal the AMT, they have remained silent on the issue for nearly a full year. Republicans are trying to prevent a massive tax increase and that is the crux of the debate - we side with the taxpayer and Democrats side with the government. We disagree with the premise that taxpayers must be forced to pay more to repeal a bad policy. We disagree with Democrats who want to pick and choose certain groups of taxpayers to be penalized for Washington's mistakes. I commend Senator DeMint for introducing this much needed legislation, and hope that the Senate will give consideration to this important reform during the AMT debate."

Highlights of the Taxpayer Choice Act include:

• Provides Comprehensive Reform. The Taxpayer Choice Act establishes a highly simplified alternative to the current individual income tax, one designed to keep federal tax revenue near its historical level as a share of the overall economy. It does not impose automatic tax increases resulting from complex tax code structures or arcane legislative procedures. It has a broad tax base, allowing for simplicity and clarity.

• Eliminates the AMT. The Alternative Minimum Tax was aimed at preventing wealthy taxpayers from exploiting loopholes in the tax code. Now, the AMT hits 30 million middle class Americans. This proposal eliminates the $841-billion tax increase that would result from the automatic expansion of the AMT, or from other tax increases imposed ostensibly to "offset" the AMT.

• Offers Taxpayer Choice. Under this proposal, taxpayers can choose either to pay their taxes under the Simplified Tax or to continue paying taxes under the existing code. The advantages of the new tax system lie mainly in its simplicity and transparency it has just two income tax rates (10 percent and 25 percent), a generous standard exemption amount ($25,000 for joint and $12,500 for single), and no special tax preferences.

• Maintains Growth-Oriented Tax Relief. The bill makes permanent the capital gains and dividend tax relief of 2003.

• Retains the Current Allocation of Tax Burdens. Analysis shows that if all taxpayers chose to pay taxes under the Simplified Tax, the distribution of tax burdens among income groups would remain close to what it is today. Thus there are no special advantages for higher income taxpayers under this proposal.

• Deters "Gaming." The proposal does not allow year-by-year tax code switches ("gaming") in order to avoid legitimate tax liabilities. In general, individuals can choose to pay taxes under the new system at some point within 10 years of the date of enactment. After that initial choice, individuals are allowed one additional changeover between the two tax systems over the course of a lifetime. The proposal makes exceptions to individuals who need change tax systems if a major life event (death, marriage, divorce) alters their filing status. Otherwise the choice is permanent.

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