The most tax­ing time of the year

Amer­i­cans de­serve a code that is fair and sim­ple

The Washington Times Daily - - OPINION - By Ed Feul­ner Ed Feul­ner is founder of the Her­itage Foun­da­tion (her­itage.org).

How does tax sea­son make you feel? An­gry? Tired? Prob­a­bly both, but there’s a good chance you also felt a bit con­fused while pre­par­ing your re­turns. And who could blame you? The mind-numb­ing com­plex­ity of the Tax Code, with its myr­iad de­duc­tions, cred­its and ex­emp­tions, can baf­fle any­one.

Sev­eral years ago, in fact, Trea­sury Depart­ment in­ves­ti­ga­tors pos­ing as tax­pay­ers con­tacted In­ter­nal Rev­enue Ser­vice cen­ters de­signed to help peo­ple with their re­turns. They got in­cor­rect an­swers (or no an­swer) to 43 per­cent of the ques­tions they asked.

Many sur­veys show that Amer­i­cans view the tax code as un­fair and cor­rupt. An overly com­pli­cated sys­tem only feeds this per­cep­tion.

Shouldn’t we have a tax sys­tem that looks like it was de­signed on pur­pose, in­stead of a jerry-rigged maze? The need to sim­plify this mess is a ma­jor rea­son we need tax re­form.

And not sim­ply to make tax prepa­ra­tion eas­ier. It’s much big­ger than that. As a re­cent Her­itage Foun­da­tion re­port notes: “The sheer com­plex­ity of the sys­tem makes it dif­fi­cult to un­der­stand the true im­pact of the tax sys­tem, in­clud­ing how much tax­pay­ers are pay­ing to the fed­eral gov­ern­ment. Tax re­form should strive to make that cost ex­plicit to tax­pay­ers. Once tax­pay­ers know how much of their hard-earned in­come goes to the fed­eral gov­ern­ment, they will be more will­ing to re­duce the size of gov­ern­ment since they will bet­ter un­der­stand how it neg­a­tively af­fects them.”

Of course, that may ex­plain why true tax re­form is so dif­fi­cult to achieve. Very few Wash­ing­ton pol­i­cy­mak­ers are truly in­ter­ested in re­duc­ing the size of gov­ern­ment. Com­plex­ity and high rates nat­u­rally fa­cil­i­tate big gov­ern­ment.

And tax rates for fam­i­lies, busi­nesses and in­vestors are too high. The top in­di­vid­ual in­come tax rate is 39.6 per­cent, and Amer­i­cans in some states pay mar­ginal rates ex­ceed­ing 50 per­cent.

Imag­ine los­ing more than half of ev­ery dol­lar you earn above a cer­tain amount. How eager would you be to ex­pand your busi­ness and cre­ate jobs?

High mar­ginal rates dis­cour­age en­trepreneur­ship — the very kind of risk-tak­ing that helped build the Amer­i­can econ­omy in the first place. And for what? To fund an ev­er­grow­ing gov­ern­ment rife with waste, fraud and abuse.

That’s why there’s more at stake than sim­ply cutting taxes, as im­por­tant as that is. A bet­ter, sim­pler and fairer tax code would help the en­tire econ­omy. That would be good news for all Amer­i­cans, no mat­ter what their in­come level.

Un­for­tu­nately, such com­mon sense of­ten gets over­looked when tax pol­icy is up for de­bate. Take the top cor­po­rate tax rate for the United States. At 35 per­cent, it stands among the world’s high­est. Talk­ing about lowering this rate to help Amer­i­can busi­nesses — and the work­ers they em­ploy — be­come stronger and more com­pet­i­tive, though, risks be­ing de­nounced for push­ing “tax cuts for the rich.”

That’s ridicu­lous. Busi­nesses can ex­pand and profit only by of­fer­ing some­thing of value to consumers. That’s very dif­fi­cult to do with­out the kind of job-cre­at­ing in­vest­ment that low tax rates en­cour­age.

Fram­ing the is­sue as class war­fare is short­sighted and wrong. True tax re­form helps ev­ery­one. As tax ex­pert Adam Michel points out: “Lowering in­di­vid­ual rates and ap­ply­ing them con­sis­tently — i.e., with­out spe­cial breaks for only some peo­ple — would help aver­age Amer­i­cans build a nest egg and re­tain more earn­ings, which they could plow back into their busi­ness, their child’s ed­u­ca­tion or their re­tire­ment plans.”

There are five broad goals that ought to ac­com­pany any kind of tax re­form:

• Or­di­nary Amer­i­cans must be able to com­pre­hend the tax law.

• Tax law should be a tool for rais­ing rev­enue, not at­tempt­ing to al­ter peo­ple’s be­hav­ior.

• Tax rates should be as low as pos­si­ble.

• Tax law should not pun­ish work, sav­ings or in­vest­ment. • Tax rates and ex­emp­tions must be trans­par­ent. “The dif­fer­ence be­tween death and taxes is death doesn’t get worse ev­ery time Congress meets,” Will Rogers once said. It’s time to change that — and help Amer­ica pros­per.

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