Should Congress act to replace the current income tax system with a new taxing system?

Background:

The current federal tax system is overly complex, burdensome and severely limits economic opportunity for all Americans. Steeply graduated tax rates on both labor and capital destroy jobs, penalize saving and investment and punish personal efforts to get ahead through hard work and education. In addition, the complexity of the tax code imposes an unacceptable burden on taxpayers and is a huge cost on the economy.

Several economically destructive provisions of the current income tax code are particularly troublesome to farmers and ranchers:

• High marginal tax rates weaken the link between effort and reward thereby depressing farm productivity;
  
  
• Multiple layers of taxation on work, savings and investment reduce capital for new investment in agriculture;
  
  
• Capital gains taxes act as a barrier to capital formation therefore preventing the flow of investment to new agriculture enterprises;
  
  
• Estate and gift taxes force families to sell their farms and terminate their businesses.
  

Legislative History:

Numerous proposals have been introduced in Congress to replace them current income tax with a sales tax, flat income tax or value added tax.

Farm Bureau Policy:

Farm Bureau supports replacing the current income tax code with a system that encourages savings, investment and entrepreneurship. The new system should be transparent, simple and require a minimum amount of personal information. Any replacement tax system must meet the following guidelines:

• be fair to agricultural producers.
  
  
• eliminate payroll taxes, self-employment taxes, the alternative minimum tax, capital gains taxes, death taxes, and personal and corporate income taxes.
  
  
• be revenue neutral.
  
  
• cannot be based on gross income.
  
  
• cannot tax business to business transactions unless for final consumption.
  

Action:

Congress should act to replace the current income tax system with a new taxing system as outlined in Farm Bureau policy. One plan that achieves Farm Bureau objectives is H.R. 2525, the Fair Tax Act of 1999 introduced by Reps. Peterson (D-MN) and Linder (R-GA), which would replace income taxes with a national sales tax.

Updated September 2000

This page was last modified Sat Sep 23, 2000 at 02:05 am