Time to Start Over With Our Tax Code
Repeal and Replace- Our Tax Code
Over the past five years, conservatives have had to constantly fight back against the deluge of liberal policies that emanate from the Obama administration. Washington has become a cesspool of anti-growth, big government proposals that would do great damage to our country and, in most cases the only line of defense has come from grassroots activists. Indeed, conservatives have been on defense since President Obama took office. So it is understandable that we may not immediately recognize a unique opportunity to go on offense and accomplish a key policy goal that has evaded our movement for decades.
Quietly, a growing consensus has developed that the federal tax code needs a complete overhaul. Something most in the conservative movement have been saying for quite some time.
Under the leadership of House Ways & Means Chairman Dave Camp (R-MI), conservatives in Congress have been winning converts to the notion of reverting to a ‘blank slate,’ which would put everything—loopholes, brackets, deductions—on the table for discussion.
The federal tax code hasn’t seen major reforms since the Reagan Administration, in 1986. In the last three decades, what we have seen are special interests and lobbyists and their allies in Congress, riddle the tax code with loopholes and carve outs that have made the code far more complicated. The tax code has not only made filing more confusing for everyone but it has aided in the distortion of economic decisions-making on the part of individuals and businesses and thus stunting economic growth.
Chairman Camp has won allies across the political spectrum. Conservatives in the House have rallied to his cause, as you would expect. But what makes an overhaul of the tax code an achievable goal is the fact that members on the other side of the aisle are coming to the conclusion that the tax code is broken and must be fixed. Even mainstream press outlets have taken notice. The USA TODAY this week editorialized in support of Camp and others, saying:
As anyone who dreads April 15 knows, the code is a farce that wastes taxpayers’ time and money, caters to the influential lobbies and corrupts Congress. In the quarter-century since the last reform, it has grown so complicated that it costs individuals and companies $160 billion each year to comply. That’s nearly double what the federal government spends annually on highways, bridges, airports and other transportation projects.
If ‘blank slate’ legislation becomes reality, conservatives will be able to realize the goal of implementing a fairer, flatter code. The elimination of loopholes, subsidies and carve-outs for special interests will allow tax rates for personal and corporate income to be reduced. And most of those loopholes will vanish when the light of transparency is shone on them. As former Republican Senator Alan Simpson and Democrat White House Chief of Staff Erskine Bowles recently wrote in POLITICO:
Importantly, starting from scratch doesn’t mean that all tax preferences will be eliminated. Instead, it puts the onus on advocates of tax preferences to justify their existence and it requires policymakers to pay for those add-backs with higher rates. We believe most will not pass the cost-benefit analysis and will either be eliminated or phased out. Those deemed to serve important public policy purposes can be added back more efficiently and cost-effectively — for example, by using credits instead of deductions.
Most tax credits and deductions in the code are nothing more than government spending by another name and should be anathema to true fiscal conservatives.
As I have written here numerous times before. Our outdated, loophole ridden tax code is too high and too complicated and a wholesale reform is necessary. If one looks at reforming and lowering just our world leading corporate income tax rate the potential for growth is obvious. As I previously wrote:
Today’s high federal corporate tax rate impairs our ability to attract foreign investment, distorts financial and economic decision-making by U.S. firms and spawns inefficient government programs and policies. Moreover, it contributes to lower wages and fewer jobs for the American workforce.
Studies have shown that workers bear up to 75 percent of the burden on the corporate income tax, and if the rate were reduced to 25 percent, the average family of four could realize an additional income of $2,484 annually. And in regards to the unemployment rate, reducing our corporate tax rate to that of our competitors could create as many as 2.2 million jobs.
The opportunity for real tax reform exists in Washington right now. A complete overhaul of the tax code would be a defeat for special interests and a defeat for liberals who constantly push for higher marginal tax rates to fund an ever-growing federal bureaucracy. As conservatives, we need to make our voices heard and encourage Republican members to support Chairman Camp and his push for a better tax code. A fairer, flatter, pro-growth tax code is a potential victory that our movement just cannot pass up.