The current tax code is a complicated mess. It stifles growth and is chockfull of market-distorting special interest handouts. As our research arm, National Taxpayers Union Foundation (NTUF) has documented, just complying with the federal tax code costs Americans $234.4 billion annually in software, lost productivity, etc. – on top of what Americans pay in taxes. Taxpayers send more than 6 billion hours filing their returns ever year, and that burden is soon to increase dramatically.
Overhauling the Tax Code
Thankfully the Platform acknowledges the complicated nature of the current tax code and calls for completing overhauling the code and radically simplifying it. While the Platform wisely calls for eliminating “as many special interest loopholes as possible and curb corporate welfare,” it does not mention further specifics of pro-growth tax reform – only principles of promoting growth, ending special interest loopholes and avoiding class warfare, among others. While solid, the Platform’s treatment of tax reform could have been more detailed.
Earlier this summer, Speaker Paul Ryan (R-WI) and Ways and Means Committee Chairman Kevin Brady (R-TX) released their bold blueprint for comprehensive tax reform. The impressive plan is Tax Reform 101: it would broaden the tax base by eliminating many of the deductions, preferences, and loopholes plaguing the code, collapse the number of brackets and lower rates. If enacted, the plan would spur economic growth by eliminating market distortions and deadweight losses that come from the current system’s excesses. NTU’s friends at the Tax Foundation recently evaluated the plan using their dynamic scoring model and the results were impressive: it would add 1.7 million jobs, increase GDP by 9.1 percent, and result in 7.7 percent higher wages.
Protecting the Internet from Predatory Taxes
Among the Platform’s most impressive sections is its treatment of the Internet and taxes. Specifically, the Platform “support[s] internet policies that allow people and private enterprise to thrive, without providing new and expanded government powers to tax and regulate …” This an important statement.
In 1992, the United States Supreme Court issued its decision in Quill Corp. v. North Dakota, which held that a state cannot require a remote seller to collect sales taxes unless the seller has a physical presence in the state. In legal parlance, this physical presence requirement is known as “nexus.” The Supreme Court’s decision has served as a check on government power and protected taxpayers from onerous collection efforts and higher taxes.
Despite the Court’s unambiguous ruling, states continue to push for expanded powers to audit and tax out-of-state businesses. NTU is pleased by the Platform’s strong support for keeping taxing authorities and governments at bay. Overbearing tax collectors should not be allowed to undermine the benefits that have arisen from the online economy.