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Common Ground on Tax Reform

by Andy Truelove / /

Our friends at the Taxpayers Protection Alliance hosted a standing-room only briefing entitled “Independence Day 2.0: Freedom from Our Outdated Tax Code,” with the goal of finding common ground across the political divide on tax reform and making the U.S. Tax Code more conducive to economic growth.

During his opening remarks, Chairman of Ways and Means, Kevin Brady (R-TX) laid out his three part plan for comprehensive tax reform. The plan would kick-start job creation by reducing our uncompetitive corporate tax rate to 20 percent, full deduction of business costs, and eliminating the death tax. Individuals would also see relief under the Brady plan from significant rate reduction and simplification. In addition, the plan would restructure the Internal Revenue Service (IRS) into three units focusing on businesses, households, and one serving to resolve tax disputes, each focusing on “Service First.”

Rebecca Boenigk, a former constituent of Brady’s and CEO of Neutral Posture, Inc., followed with a unique perspective as an entrepreneur that had dealt with the inefficiencies and complexities of the tax code. She stressed that uncertainty compounded these problems for business owners, who often have to deal with unexpected taxes and hours of work for compliance.

Pete Sepp, President of National Taxpayers Union, began his remarks by citing a November 2001 McKenna Research poll, which found that Americans fear an audit from the IRS in the mail more than anthrax. The poll illustrated the fear many Americans have of the IRS and the need for a Taxpayer Bill of Rights, which would protect citizens from IRS abuse and overreach. Sepp cited the fact it costs nearly 9 billion hours to comply with our outdated tax code each year and that number is expected to rise considerably in the coming years. Much like Boenigk he stressed how uncertainty leads to businesses holding off on growth and hiring. He also made the point that Congress has the channels to hold the IRS accountable by bringing them before the legislative body to examine their practices and deal with inefficiencies. The reforms that Chairman Brady proposed would address these issues of uncertainty and cost through simplification of the tax code and the reform of the Internal Revenue Service.

Simon Rosenberg, President and Founder of the New Democrat Network, a center left think tank, sought to find common ground with the other panelists. He strongly encouraged those on the right to view their counterparts on the other side of the aisle as economically literate partners in the fight for tax reform. He urged his counterparts to stress simplification and reducing the enormous burden of tax compliance. He explained this was a policy objective that could be accomplished on a bipartisan basis.

Despite disagreement on specific tax rates, the event verified noteworthy agreement across the ideological spectrum to reform the Tax Code, with simplification emerging as an important opportunity for bipartisan cooperation. Even modest improvement in this area would save billions of dollars in wasted time and resources currently tied up in tax compliance. Of course, in order to achieve this it would mean everyone has to put aside their pet projects and Tax Code-carve-outs that provide advantageous tax breaks to favored kinds of income or industry, as well as those punitive tax rates applied to discourage certain industries (such as energy taxes) or simply boost coffers. This kind of meddling increases tax complexity and distorts markets. Still, there’s reason to be optimistic that lawmakers can put taxpayers first and chart a path forward to make the Tax Code fairer and flatter for everyone.