(FORTUNE Magazine) – Everyone knows about proposed middle-class tax cuts--but that's small change compared with other reforms brewing on Capitol Hill. The way you pay taxes may soon be radically altered, with the basis shifted from income to consumption.

Don't expect anything resembling a transaction-based value-added tax (VAT). Governors hate the idea because their own sales taxes bring home the bacon. And the VAT has powerful foes in Congress. Says House Majority Leader Dick Armey: "A VAT is an insidious hidden tax, which I will fight forever!"

Instead, Armey offers up one of two leading contenders for a consumption tax. His would impose a 17% levy on all wages, salaries, and pensions, above a set living allowance. The other contender is the "USA" plan, backed by Senators Pete Domenici (R-New Mexico) and Sam Nunn (D-Georgia). It would levy three progressive rates on most individual income not saved or invested. For businesses, both would impose a low flat tax, around 10%, on cash flow.

The plans differ significantly. Armey's kills deductions for charities, mortgage interest, and employer-provided health care; Domenici's does not. His three rates preserve the cur rent distribution of tax burden; Armey's flat rate would shift that burden and is simpler to administer.

But more important, the plans share key similarities. Both wipe out double taxation of capital and simplify the tax structure. Savers would win, consumers would lose, and accountants may need new jobs.

Passage of any such bill in the current Congress is unlikely, but future prospects are brighter than ever. Harvard economist Dale Jorgenson estimates that an Armey-style consumption tax could increase cumulative U.S. wealth 13%, or $2 trillion. That must be music to the ears of a Republican Party eager to maintain its newfound majority. (For more, see The Economy.)

- Ann Reilly Dowd