Perspectives on the Need for Tax Reform
There are roughly 7.7 million words of tax regulations, promulgated by the IRS over the last century, which clarify how the U.S. tax statutes work in practice. On top of that, there are almost 60,000 pages of tax-related case law, which are indispensable for accountants and tax lawyers trying to figure out how much their clients actually owe. Tax complexity creates real costs for American households and businesses, starting with just the time it takes us to comply with the tax code. According to the latest estimates on Reginfo.gov, Americans spend over 8.9 billion hours complying with IRS tax filing requirements, equal to nearly 4.3 million full-time workers doing nothing but tax return paperwork. To put that in perspective, 4.3 million is greater than the populations of 24 U.S. states. This testimony comprehensively analyzes income tax policy, corporate (business tax policy), and focuses on modeling tax reform plans based on four key examples: The Lee-Rubio Tax Plan, Ted Cruz’s Tax Plan, Ben Carson’s Flat Tax, and Ben Cardin’s Progressive Consumption Tax. The Tax Foundation found that the complexity caused by measures designed to make the tax code more progressive shrink the economy and kill jobs. It also discovered that the complexity caused by tax policies to help the poor can discourage work and shrink wages. Finally, the extremely complex corporate income tax—from its high rate, badly designed cost recovery systems, and twin layers of taxation—leads to less investment, fewer jobs, and a smaller economy.