The Simplified Unlimited Savings
Allowance Tax
(SUSAT)
Barry K. Rogstad
Former President
American Business Conference
Before The
President’s Advisory Panel on Federal Tax Reform
May 11, 2005
Washington, DC
Overview

Advance the proposal for the Simplified Unlimited
Savings Allowance Tax (SUSAT)

SUSAT directly addresses the core concerns of the
current tax code, that are impediments to our Nation’s
economic growth and the future standard of living of all
citizen’s

SUSAT is a simple, plain-language rewrite of the code
-It shrinks the tax code to a fraction of its present
size
-It is simple in its presentation: it is transparent
and understandable to all users
SUSAT

On the Business side:
-Treats all businesses alike
-Lowers tax rates dramatically
-Allows first-year expensing of business equipment
-Export income is excluded and foreign-source
income is excluded on a “territorial basis”
-Also allows the option for an import tax
-Makes unnecessary the array of special interest
deductions and credits that complicate business
taxes today
SUSAT

On the Individual Side:
-Allows all Americans the freedom to save to any
level and for any purpose -- through an account
patterned after the Roth IRA
-Saved income is taxed only once
-Maintains the current treatment for charitable
giving and home mortgage interest
-Adds a deduction for human capital (in the form of
a benefit for post-secondary education)
-Lowers and flattens tax rates, but preserves
progressivity
How SUSAT Works
The Simplified USA Tax (Generic Model)
Business-Level Tax
 Rate: 8% on first $150,000 and 12% on excess
 Tax Base: Revenues from Domestic Operations (-) Export Income
(-) Purchases of Inventory (-) Purchases of Equipment & Services
 Payroll Tax: Tax Credit for Employer-Paid Payroll Tax
 Imports: Allows 12% Tax on Imported Inventory, Equipment & Services
Note: No Deduction for Wages Paid, Dividends Paid or Interest Paid
Outflow of Wages
Individuals
Outflow of Interest
and Dividends
Individuals
How SUSAT Works
Inflow of Interest
and Dividends
Inflow of Wages
Individual-Level Tax
 Rates: Progressive Rates of 15, 25, and 30% (illustrative, could be lower)
-15% rate on dividends and gains
 Tax Base: Wages + Interest + Dividends + Sales of Stock and Other Assets
(-) Deductions
 Savings:
(1) Universal Roth IRA -- No Deduction Allowed for Contributions, but
Previously-Taxed Principal and Earnings on Principal Are Not Taxed when
Withdrawn from USA Roth IRA. No Limit on Contributions and No
Restrictions on Withdrawals
(2) Deduction for §401(k), etc. -- Preserves Limited Deductions Allowed under
the Current Code for §401(k), Other Employer-Sponsored Qualified Plans
and Deductible IRAs
 Other Deductions: Deductions for Exempt Amount & Deductions for Home
Mortgage Interest, Charitable Contributions & Secondary Education
Origins of SUSAT
SUSAT is the distillation of a bipartisan process that has gone on for
more than a decade

Senators Pete Domenici and Sam Nunn began work on the project in
1991 and continued working over the next four years to fully develop
their Unlimited Savings Allowance (USA) tax proposal


Their guidelines:
-Retain the familiar framework of the current income tax
-Follow a proven intellectual pedigree -- the core
framework stemmed from the well-known ideas of the late
David Bradford
-Insure bipartisan support and involvement throughout
the process
-Commitment to revenue neutrality and progressivity
In 1998, Republican Congressman Phil English simplified the USA
Tax with SUSAT

The SUSAT Simplifications

Like a “consumed income” tax, the original USA Tax allowed
a deduction for saving and taxed withdrawals from savings

But complex rules were needed to account for all possible
saving and dissaving transactions
-Transition rules were needed to track the basis of
previously taxed assets that taxpayers already owned -and it was necessary to distinguish between old saving,
new saving, gross saving and net saving

The need for all these complexities disappeared under
SUSAT because it, in the manner of the Roth IRA, collects
the tax upfront and then exempts from further tax the yield
on that after-tax savings and all withdrawals from the
account
-It is this simple way of accounting for savings that
will give SUSAT special credibility with taxpayers,
tax practitioners and government tax administrators
Conclusions

SUSAT is a technically rigorous, workable and understandable
approach to tax restructuring

There is nothing radical about any of the working components of
SUSAT. Indeed, many have been partially adopted in the current
tax code

SUSAT, by preserving the income tax structure, eliminates the needs
of other tax reform proposals to impose entirely new collection
mechanisms and layers of administrative bureaucracy

SUSAT addresses all major criticisms of the current code: antigrowth; anti-saving and investment; excessive complexity; and
taxpayer mistrust and misunderstanding

SUSAT has proven bipartisan appeal

I, therefore, respectfully suggest SUSAT is worthy of a full
consideration by the members of the President’s Tax Reform Panel