Most Americans agree that tax reform and significant tax cuts are badly needed.
The keys to successfully reinventing our tax system are to make it simple, fair, to encourage U.S. competitiveness and to stimulate economic growth.
Not many folks would argue that the tax code isn’t too complicated. Weighing in at 75,000 pages it’s a monstrous compilation of arcane language and unnecessarily complicated gobbledygook. It’s grown like kudzu.
Throughout the federal tax code’s first 25 years it was less than 500 pages. Now it’s nearly 200 times longer than it was originally.
The code’s sheer size is a problem. The bigger issue is its complexity.
In the weeks leading up to April 15 Americans realize how terribly complicated it is. Complying with the federal tax code consumes more than 6 billion hours of time each year. That’s all pulled out of the productive economy.
As congressional Republicans roll out their tax reform blueprint, Americans looking for simplicity, fairness, U.S. competitiveness and a growing economy should be smiling.
Although it’s not all that could be hoped for (legislation never is), it’s a big step toward making America more competitive in the world market and a big boost for American workers and middle class families.
Yet before the announcement had concluded, Chuck Schumer, Nancy Pelosi and their cronies were busy peddling the “tax cuts for the rich” line. Of course they were; they’ve been mouthing that line for so long they can’t believe there’s any other message.
The truth is that reforms and tax cuts are needed by all Americans. As President Kennedy boldly proclaimed and President Reagan proved, “a rising tide lifts ALL boats.”
The rising tide begins with America competing and winning in the world’s economy. The GOP plan will cut corporate rates from 35 percent to 20 percent. That’s not as low as President Trump wants, but it’s a giant step in the right direction.
Right now our corporate tax rate is the highest in the industrialized world. Cutting our rate to 20 percent would put us somewhere in the middle of the pack (the “first-world” average is about 22.5 percent).
That major tax cut would allow us to compete much more effectively. It would mean more jobs and fatter paychecks for American workers.
The plan would also bring back more than $2.5 trillion that is now parked “offshore” as a shelter against an oppressive tax system. Bringing that money back into the American economy benefits everyone.
Another “quiet” but enormous benefit to the American economy is the proposed rate reduction for small business owners who “pass through” income on K1s to their personal returns.
That rate would be cut to 25 percent, allowing more money to be re-invested in the growth of small family businesses, the great American job creators.
Individuals benefit from the proposed plan both directly and indirectly. Folding seven brackets into three is a good start.
Doubling the standard deduction to $24,000 for married couples is a big boost for middle income taxpayers.
So is the fact that the bigger deduction eliminates the need for many of the exemptions that clog up the current code. Millions of American taxpayers will now be able to fill out their taxes on something as simple as a postcard.
Making our tax system simpler and lowering rates reduces tax avoidance and evasion. It provides more certainty for folks planning for their kids’ college payments or their retirement.
It eliminates many of the factors that allow people with similar incomes to pay very different amounts of taxes.
The left, especially those dead set on raising people’s taxes, can’t stand this. In addition to their worn-out “tax cuts for the rich” monotone, they also claim that cutting taxes will “blow a hole in the deficit.”
Strangely, this crowd was very quiet while the debt grew exponentially.
The left’s “Tax Policy Center” was out decrying the plan even before it was released.
Their argument is based upon a stagnant economy. That’s understandable as they are accustomed to the slow growth “secular stagnation” of the Obama years.
Thank God, the economy is now growing. We went past 3 percent in the last quarter.
The whole idea that we as a nation are consigned to 2 percent or less growth is abhorrent. A thriving and growing economy is stimulated by cutting tax rates.
As Kennedy told us, “The right kind of tax cut at the right time…is the most effective measures that this government could take to spur our economy forward.”
Kennedy’s tax cuts produced economic growth above 5 percent. Reagan’s averaged nearly 5 percent after they were fully implemented.
Both Kennedy and Reagan accomplished their economy-growing tax cuts through bipartisan action. Kennedy got help from many Republican congressional leaders. When Reagan pushed his first tax cut, almost 50 House Democrats voted for his plan.
When he sought additional tax cuts and simplification, the vote in the Senate was 97-3. Even another Kennedy, brother Ted, voted in favor of the Reagan plan.
The rising tide of both the Kennedy and Reagan efforts lifted an awful lot of boats.
The tide will again rise if enough congressional Democrats will help make economic growth the by-word of the next era.
The writer is the CEO of Quantum Communications which has a Maryland office in Annapolis. He can be reached at [email protected]