March 8, 2006

Kansas Senator floats flat-tax plan for Washington

By David Lawder

WASHINGTON (Reuters) - The District of Columbia would
become a laboratory for a flat federal income tax system if
Kansas Republican Sen. Sam Brownback has his way.

Brownback, who chairs the Senate Appropriations
subcommittee on D.C., said on Wednesday he intends to seek
support from Senate leadership for legislation to create an
optional flat tax in the U.S. capital, with a low rate but none
of the traditional deductions for expenditures like home
mortgage interest and retirement savings.

"The federal government has a unique opportunity to try out
a flat federal income tax in the District of Columbia,"
Brownback said.

Flat-tax proposals have featured prominently in the debate
over broader federal tax reform in the past year, but President
George W. Bush's tax reform panel recommended modifying the
current system by eliminating some deductions but keeping

Under Brownback's theory, a flat tax in D.C. would boost
the city's economy, driving up local revenues while drumming up
broad U.S. support for a national flat tax. D.C. residents
could still file under the old system, but few would want to,
he said.

He convened a group of conservative and libertarian tax
experts to testify at the hearing.

"D.C. would have a much faster growth rate and the rest of
the country would put a lot of pressure on Congress, and we'd
break through the special-interest log-jam," said Daniel
McKenna, a senior fellow a The Heritage Foundation.

"D.C. would be the enterprise zone of all enterprise

But Chris Edwards, Director of Tax Policy for the
libertarian Cato Institute, said that while lower rates can
spur growth, there may be some initial federal revenue losses
that may require a reduction in the generous subsidies that the
city receives from the federal government.

Brownback said his proposal would need to be put on the
agenda of the Senate Finance Committee, which oversees tax
legislation. He said he would try to "sell it forward" to
committee chairman Sen. Charles Grassley before drafting a
specific bill.

A spokeswoman for Grassley said the Iowa Republican "is
always receptive to senators' ideas on ways to improve the tax
code for tax payers."

But District of Columbia officials, who were not invited to
Tuesday's hearing, were less receptive.

"The theory of the flat tax is a lot more appealing then
the reality," said Vincent Morris. "We would have serious
concerns that a flat tax imposed strictly on the District would
be neither fair nor progressive. However, we've worked closely
and well with Sen. Brownback in the past and hope to do so in
the future."

Paul Strauss, Washington's non-voting delegate to the
Senate, said he had serious problems with the elimination of
federal income deductions for home mortgage interest, which has
fueled residential development, and for charitable donations to
non-profits that aid the city's poor.

"We don't want to be part of this experiment," Strauss
said. "Some of what I heard today cast him (Brownback) more in
the role of mad scientist than economic reformer."

Due to Washington's unique federal role the fact it is not
part of a state and has no voting representation, Congress has
considerable legislative powers over the city.

"I'd love to have Kansas be the laboratory rather than the
federal district," Brownback said, adding that such a move
would be more politically difficult.