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taxation;'° (b) has low tax rates on a broad, neutral tax base; (c) minimizes interference with the operation of the free market and free enterprise; and (d) minimizes the cost to taxpayers of compliance with and administration of the tax system.

• Second, the tax system should minimize its adverse impact on the family and the core institutions of civil society.

• Third, the tax system should be applied consistently—with special privileges for none—and respect taxpayer due process and privacy rights.

The current tax system is inconsistent with these principles and needs to be reformed to promote prosperity, reduce compliance costs, and improve fairness. The incoming Administration should promote immediate intermediate reforms to the existing system. It should then pursue fundamental tax reform.

Intermediate Tax Reform. The Treasury should work with Congress to simplify the tax code by enacting a simple two-rate individual tax system of 15 percent and 30 percent that eliminates most deductions, credits and exclusions. The 30 percent bracket should begin at or near the Social Security wage base to ensure the combined income and payroll tax structure acts as a nearly flat tax on wage income beyond the standard deduction. The corporate income tax rate should be reduced to 18 percent. The corporate income tax is the most damaging tax in the U.S. tax system, and its primary economic burden falls on workers because capital is more mobile than labor.” Capital gains and qualified dividends should be taxed at 15 percent. Thus, the combined corporate income tax combined with the capital gains or qualified dividends tax rate would be roughly equal to the top individual income tax rate.’* The system should allow immediate expensing for capital expenditures and index capital gains taxes for inflation.

In addition, intermediate tax reform should repeal all tax increases that were passed as part of the Inflation Reduction Act,” including the book minimum tax, the stock buyback excise tax, the coal excise tax, the reinstated Superfund tax, and excise taxes on drug manufacturers to compel them to comply with Medicare price controls. The next Administration should also push for legislation to fully repeal recently passed subsidies in the tax code, including the dozens of credits and tax breaks for green energy companies in Subtitle D of the Inflation Reduction Act.”°

Universal Savings Accounts. All taxpayers should be allowed to contribute up to $15,000 (adjusted for inflation) of post-tax earnings into Universal Savings Accounts (USAs). The tax treatment of these accounts would be comparable to Roth IRAs. USAs should be highly flexible to allow Americans to save and invest as they see fit, including, for example, investments in a closely held business. Gains from investments in USAs would be non-taxable and could be withdrawn at any