Sen. Jim DeMint, R-S.C.

A South Carolina senator dissatisfied with the results of a Bush advisory panel’s recommendations on tax reform is set to introduce a bill to abolish federal income tax in favor of a levy on business transactions.

Sen. Jim DeMint, R-S.C., told the New York Sun he would put his plan before the Senate tomorrow. The proposal calls for an end to all personal income taxes and the attendant bevy of related taxes, deductions and exemptions, including the estate tax and the alternative minimum tax. The plan would eliminate the need for Americans to file income tax returns.

The president’s panel, led by former Sens. Connie Mack and John Breaux, issued two proposals to reform parts of the tax code, but it didn’t go far enough for many tax-reform activists.

DeMint told the paper the recommendations were “not the real reform we need.”

“With the panel endorsing small changes,” DeMint added, “I felt it necessary to get my plan for comprehensive reform out as quickly as possible.”

According to the Sun report, the DeMint plan, which is co-sponsored by Sen. Lindsey Graham, R-S.C., includes an 8.5 percent federal retail sales tax on all new goods and services. Corporate income taxes would be replaced by an 8.5 percent business transfer tax charged during purchases of supplies or equipment.

Senate staff members tell the paper the 8.5 percent figure had been determined after consultation with economists to assure the proposal would remain revenue-neutral.

Under the plan, every American living below the federal poverty level would get a rebate for 8.5 percent of poverty-level income – which, for a family of four, is about $19,000 a year, the paper reported.

“There is a growing urgency and consensus that the tax code is killing our ability to compete in the global economy,” DeMint is quoted as saying. “It’s as if we have huge signs on our beaches saying, ‘Take Your Business Somewhere Else!’

“Tax reform has never been more relevant.”

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