Capitol Watch Calls on Congress to Simplify Tax Code
July 03, 2013
Washington, D.C. – CapitolWatch is calling on members of the U.S. House of Representatives and Senate to act on sweeping reforms to our nation’s tax code. Taxpayers spend over 6 billion hours and over $160 billion every year on efforts to comply with the tax code. Simplifying and streamlining income tax rates, while lowering corporate taxes is balanced mix which would spur economic growth and free taxpayers from the burden of a draconian tax code.
CapitolWatch is encouraged by House Ways and Means Chairman Dave Camp (R-MI) and Senate Finance Committee Chairman Max Baucus (D-MT) have announced the launch of TaxReform.gov, a website dedicated to obtaining input from the American public on tax reform.
According to a press release from the House Ways and Means Committee, the site was “developed in partnership with the Joint Committee on Taxation, TaxReform.gov will serve as a platform for the American public to weigh in on tax reform. Input from visitors to the web site will be valuable to the Senate Finance Committee and House Ways and Means Committee as they craft legislation. The site also incorporates many Twitter tools that allow the public to weigh in by following @simplertaxes.”
As those committees move forward on a comprehensive solution to our outdated tax code, CapitolWatch encourages our legislators to consider the following points when overhauling both the income tax code and the corporate tax code:
Consider the Flat Tax and the Fair Tax proposals.
According to two studies, nearly half of Americans aren’t paying taxes. In a study by the Tax Policy Center, they estimate that 46 percent of American households either will pay no federal income tax in 2011 or will receive more from the IRS than they pay in. Contrast that with 1984, when 85 percent of Americans paid federal income tax.
The Fair Tax would replace all Federal taxes on personal and corporate income with a single broad national consumption tax on retail sales. This would apply a tax once at the point of purchase on all new goods and services for personal consumption. The proposal also calls for a monthly payment to all family households of lawful U.S. residents as an advance rebate, or “pre-bate”, of tax on purchases up to the poverty level. First introduced into Congress in 1999,a number of congressional committees have heard testimony on the bill; however, it has not moved from committee and has yet to have any effect on the tax system.
Similarly, the implementation of a Flat Tax, or single level of income taxation for all Americans, would introduce some much needed equality to our tax code. A single marginal rate, instead of a progressive tax rate, ensures that all Americans have some skin in the game when it comes to paying into the Federal budget. So far seven states —Colorado, Illinois, Indiana, Massachusetts, Michigan, Pennsylvania, and Utah — have seen the benefits of this system and tax household incomes at a single rate. These range from 3.07% in Pennsylvania to 5.3% in Massachusetts. Pennsylvania even has a pure flat tax with no zero-bracket amount.
While both of these proposals share the similarity of a single rate of taxation, they also share the larger goal of tax simplification. The Fair Tax and the Flat Tax eliminate the need for completing the burdensome and arcane Federal Income Tax forms. Each year Americans spend billions of dollars simply just to complete their taxes. With each of these systems, taxes would be filled out on a simple post card.
Many countries have taken steps recently to cut corporate tax rates. Most recently, Japan officially cut its corporate tax rate to 36.8 percent, leaving ours in the lead at 39.2 percent. Countries with more restrictive economies like Russia and China have rates of 20 percent and 25 percent, respectively; essentially leaving our businesses at a competitive disadvantage
This is a fact which hasn’t been lost on leaders of both political parties. President Obama has proposed lowering the rate to 28 percent, but while adding in $350 billion in new taxes. Republicans, have pushed for a cut to 25percent without additional taxes. A middle ground may be a closing of many of the loopholes in our arcane tax structure and a significant rate cut. With unemployment still soaring and millions of Americans out of work, additional funds in the hands of the private sector would be helpful to spur a true economic recovery. With the election season heating up, this may be one area where our elected leaders can come together and find a positive solution.