Although the flat tax proposal has been the focus of tax reform debate recently, it is not the only proposed reform plan. Backers of two other proposals say their plans would exempt capital from taxation and spark an economic boom. One is the "USA tax" and the other is a national sales tax.

The USA tax -- which stands for Unlimited Savings Allowance -- has been proposed by Sen. Sam Nunn (D-GA) and Sen. Pete Domenici (R-NM). It would:

• Allow taxpayers to deduct savings with no limits -- in effect permitting "Super IRAs" from which they could make early withdrawals without penalties.

• It would allow deductions for mortgage interest and charitable giving; but eliminate them for medical expenses, casualty losses, and state and local property taxes.

• But a new value-added tax of 11 percent would be imposed for businesses, incorporated or not.

• And a 40 percent top tax rate kicks in at $14,400 for single taxpayers and at $24,000 for joint filers.

The other tax plan currently vying for attention is a national sales tax, supported by House Ways & Means Committee Chairman Bill Archer (R-TX). One version of the plan has been introduced by Rep. Dan Schaefer (R-CO) and Rep. Billy Tauzin (R-LA).

• In lieu of the income tax, all retail purchases would be subject to a federal tax somewhere between 10 to 20 percent, thus taxing consumption rather than production or savings.

• It would phase out the IRS by 1999, while states would administer the tax in exchange for a small percentage of the take to cover costs.

• A tax credit in paychecks would ensure that those below the poverty level pay no taxes.

• A "used-property tax credit" would refund the entire amount of the tax when a home is sold, applicable to the next home purchase.

It has been estimated that compliance costs under this plan would fall from the current $157 billion to about $8 billion annually. And according to Stephen Moore of the Cato Institute, the sales tax has more grassroots and congressional support than the USA tax plan.

However, the sales tax has critics. Bruce Bartlett, senior fellow at the National Center for Policy Analysis, warns of substantial problems with the sales tax approach.

• A sales tax of more than 10 percent on services would encourage massive evasion.

• Under a national sales tax, states might abolish their own sales taxes while increasing income taxes -- thus eliminating the sales tax collection machinery upon which the plan depends.

• A sales tax could be changed into a value added tax that could be raised too easily because it's hidden.

Source: Thomas McArdle, "Will Other Tax Reforms Work?" Investor's Business Daily, April 2, 1996.