A couple years ago, government investigators sent identical tax returns to 19 professional tax preparers. Two of them came up with the right refund; 17 got it wrong. In typical government fashion, to address this sort of problem the IRS has suggested that more federal regulation is needed for tax preparers.
This object lesson reminds me of the old story about the truck jammed under the overpass. The experts couldn’t figure out what to do. A little girl passing by in her parents’ car yelled out the window, “let the air out of the tires.”
The mess that is our tax code is a result of decades of bad decisions. But we can fix it this year. We need to “let the air out of the tires” of the tax code and get our economy unstuck.
The last time Congress comprehensively reformed U.S. tax laws, Ronald Reagan was president. In the years since, thousands of small tweaks and changes have been made. The tax code has grown to nearly 4 million words — more than 10 times longer than Centennial, James Michener’s epic novel chronicling the history of Colorado.
Every year, Americans spend 6 billion hours and nearly $200 billion trying to comply with IRS requirements. Thatap time and money you could be putting to more fruitful uses — saving for college, hiring more employees, going for a hike, reading a good book.
How’d we get here?
Washington, D.C., is home to more than 4,000 tax lobbyists. Unfortunately, most of them are good at their jobs. They work for well-connected special interests that can afford to hire them to plead for special carve-outs in the tax code. Those exemptions, deductions, credits and loopholes amount to hundreds of billions of dollars in subsidies for people who don’t need them.
In a poll last November, almost three quarters of Americans said the economy “is rigged to advantage the rich and powerful.” The sad fact is, they’re right, and the tax code bears a large part of the blame.
Tax reform that creates a simpler, fairer system with lower rates and fewer brackets, cuts the corporate rate to make U.S. employers competitive with their international competition, and creates certainty about who owes what would go a long way toward boosting jobs and wages, and restoring some faith in the American Dream.
These principles should garner bipartisan support. After all, who wants to defend corporate welfare and giveaways to the well-connected?
Colorado Sen. Michael Bennet serves on the Senate’s tax-writing Finance Committee, so is well-positioned to have an impact on this issue. Unfortunately, so far all he has offered are tired old class-warfare cliches about how tax reform would “explode the debt” and benefit only “the wealthiest families and individuals.” The history of tax cuts over the past five decades and across administrations of both parties shows that both charges are simply false.
In the decade following the “Kennedy” tax cut, proposed in 1962 and enacted in early 1964 — federal tax receipts increased by $283 billion. The same thing happened in the wake of the first Reagan tax cuts that were fully phased in by 1983, when federal revenue rose by $400 billion. In the 10 years after the Bush tax cuts of 2003, tax receipts rose by $227 billion.
Tax cuts didn’t “explode the debt.” Out-of-control spending did.
And Americans across all income levels benefited from the cuts. A total of almost 28 million jobs were created in the five years following those three tax cuts, and disposable income rose a cumulative $7,482 per person.
Rather than fearing that tax reform would help the well-connected at the expense of the rest of us, we need tax reform precisely because the current system already does that.
Federal tax collections consume almost 17 percent of Colorado’s GDP, more than all but one of our neighboring states. We’re paying too much, and Washington needs to do something about it. And Colorado is going to send them a strong message to get the job done at our rally tomorrow, Tuesday, August 29 at 11:30am in Denver’s Civic Center Park at the Lincoln Memorial.
Jesse Mallory is Colorado state director for Americans for Prosperity.
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