On Tax Reform

By James Schaefer.

By any measure, the tax code is too complex.  It currently totals 70,000 pages and defies both comprehension and easy compliance by mere mortals.  Collectively, Americans spend $168 billion each year in compliance costs.

The latest attempt to simplify the code comes from Congressman David Camp of Michigan, who has spent the past three years analyzing the specifics.

Here is a synopsis of his proposal:

  • Remove most deductions, credits, and special treatment for interest groups
  • Replace them with two standard deductions: $11,000 for individuals and $22,000 for couples
  • The mortgage interest deduction would remain; however, 95% of taxpayers would no longer itemize
  • The corporate tax rate would drop from 35% to 25%

“Congress’s tax scorers predict the Camp reform would create $3.4 trillion more in economic growth and 1.8 million new jobs,” writes the Wall Street Journal (Opinion: Tax Reform and Growth; February 27, 2014).

The goal for any tax reform — unpalatable as it may seem to most working Americans — is that the reform be revenue-neutral for the federal government.

Better than that, the Joint Tax Committee believes that David Camp’s proposal, if it were enacted, would generate $700 billion in new revenue over a decade.

If accurate, that would be a win-win-win for the American economy: higher GDP, more jobs, and more tax revenue.  Jack Kennedy understood this, as did Ronald Reagan and Bill Clinton (” . . . it’s the economy, stupid . . .”).

The issue is not whether Mr. Camp’s proposal has merit.  It’s whether this — or any — government should put in place a system so complex that the average person cannot do their own taxes without the help of an enrolled agent or tax professional.

There is a better way.

 

 

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