Republican presidential hopeful Fred Thompson proposed an income tax plan Sunday that would allow Americans to choose a simplified system with only two rates: 10 percent and 25 percent.
Thompson's proposal, announced on "Fox News Sunday," would allow filers to remain under the current, complex tax code or use the flat tax rates.
Asked whether the plan would cut too deeply into federal revenues, the former Tennessee senator and actor said experts "always overestimate the losses to the government" when taxes are cut.
"We've known for years any time we have lowered taxes and any time we've lowered tax rates, we've seen growth in the economy," Thompson said.
Thompson added that money would be saved by his Social Security reform plan. He proposed that workers younger than 58 receive smaller monthly Social Security checks than they are now promised. Individuals could contribute 2 percent of their paycheck to a personal retirement account, an amount that would be matched by the Social Security trust fund.
The retirement plan "faces up to the fact that Social Security is going bankrupt and we're going to have to do something about it," he said.
Key aspects of Thompson's tax proposal:
--The choice of filing under the current system or a flat tax rate of 10 percent for joint filers with an income of up to $100,000 -- $50,000 for single taxpayers; and 25 percent on income above these amounts.
The standard deduction would be more than doubled to $25,000 for joint filers and $12,500 for singles. The personal exemption would be increased to $3,500. A family of four would be exempt from income tax on the first $39,000. The simplified code would contain no other tax credits or deductions, and retain the 15 percent tax rate on capital gains and dividends.
--Preserving the $1000 child tax credit, which was doubled from $500 per child.
--Protecting marriage penalty relief.
--Retaining education tax incentives, including Coverdell Education Savings Accounts, 529 college savings plans, and deductions for higher education expenses.
--Permanently repealing the estate tax.
--Eventually repealing the Alternative Minimum Tax, a separate system created 30 years ago to ensure that a few high income Americans could not use deductions and credits to eliminate their tax liability.
Thompson also would index the exemptions annually so that millions of middle-class families would not be subject to the tax.
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