Under a flat income tax there would be one rate--Mr. Forbes recommends 17%, with a personal exemption of $13,000 per adult and $4,000 per child or dependant, along with a $1,000 per child tax credit. Thus a family of four would pay no federal income tax on its first $46,000 of income. There would be no double taxation of dividends, no capital gains taxes, death taxes, or taxes on Social Security benefits. The tax return would be simpler and easier to fill out: From your wages and salary subtract your personal and dependent exemptions and multiply the result by 17%. It would almost be a tax on a postcard, a huge improvement over the massive complexity of the Internal Revenue Code. (Corporate profits would be taxed at a flat 17% too.)

So what would the impact of such a system be on Federal tax receipts? Very positive, because income tax rate reductions tend to raise income tax receipts. The Kennedy income tax cuts of the 1960s reduced top rates from 91% to 71% and boosted revenues by one-third, raising the four-year average annual tax revenue growth from 2.1% to 8.6%. The Reagan tax rate reductions of the 1980s saw tax revenue increase 56% over eight years.
The reason for such increases in tax receipts is economic growth--lower tax rates mean higher economic growth, more investments, more jobs, greater incentive for people to work harder to earn more money, and thus the economy expands, which in turn means more government tax revenue. I report, U decide.