Even though it would eliminate the tax deduction for interest on home mortgages, Congressman Dick Armey says his proposed flat tax would be a boon to the housing industry in America.
U.S. Representative Dick Armey insists that "today's tax code is so complicated, so frustrating, so unfair, so politically manipulated, and so economically counterproductive [that] it cannot be reformed. It must be replaced." The Texas Congressman contends that the tax code "is artificially suppressing our national standard of living" by stifling innovation and job-creation and by discouraging saving. "The single most destructive aspect of today's tax code," says Armey, "is that it taxes the source of capital -- saving -- twice, and sometimes three times, thereby artificially shrinking the capital pool and impoverishing the American worker."
Armey boasts that his proposed flat tax is "so simple you could do your taxes on a postcard." The current complex and confusing tax code would be scrapped and all exemptions would be eliminated, except for a "family allowance" indexed to inflation. "Beyond that," says Armey, "everyone pays a flat 17 percent on all income. No deductions. No loopholes. No tax breaks. No tables. No nothing."
Armey says there are at least four reasons for favoring the flat tax over the present tax system. It's fair, it's honest, it's less paternalistic, and it's pro-growth. The flat tax is fair because it "treats everybody the same." It's honest because, with loopholes removed, "it shows us right up front how much government is really costing us." It's less paternalistic because,"by eliminating the code's social engineering and economic tinkering, it shifts power from politicians to private citizens." The flat tax is pro-growth for two reasons. "First, switching to the flat tax would liberate the economy to be more efficient, replacing today's maze of politically targeted tax breaks with a system that is perfectly neutral [and allowing financial resources] to seek out their most efficient use. Second, the flat tax dramatically lowers the burden placed on work, savings, and investment."
Congressman Dick Armey predicts that "the flat tax will be one of the best things that ever happened" to the housing industry, too. By eliminating "the tax premium that is currently built into interest rates" and "the discriminatory treatment of savings," the flat tax will apply downward pressure on interest rates, thus reducing the cost of borrowing. By allowing businesses "to write off the costs of their capital purchases immediately," the flat tax will precipitate a decline in construction costs. And, by spurring economic growth, the flat tax will stimulate increased demand for housing.
Armey argues that the many advantages of the flat tax more than compensate for the loss of tax deductions for interest on home mortgages. Evidently, the American people agree with him. Armey cites a recent poll that showed three out of four homeowners "willing to forgo the mortgage deduction if that loss is offset by a reduction in their tax bill by a similar amount."
