For too long American families and businesses have been at the mercy of a tax code that has impeded economic growth and innovation. With sky-high tax rates, archaic provisions like the death tax and numerous distorting credits and deductions, the code does not work for taxpayers. Our code is in desperate need of an overhaul, here are the top three reasons why:
- The tax code is too complex. The tax code has been getting longer and more complicated, filled with unnecessary and outdated provisions that many Americans not only do not understand but in many situations are simply unaware of. With seven different tax brackets and a 74,000 page code, the complexity of the tax code makes it difficult for Americans to complete their taxes without having to hire a costly professional. A study released by the Tax Foundation estimated that Americans will spend $409 billion and 8.9 billion hours completing their taxes this year. There is no reason why filing taxes should require so much time, energy, and money.
- The tax code hurts economic growth. The U.S corporate tax rate sits at a staggering 39 percent, towering over the global average of 25 percent. The top federal rate for businesses organized as a pass-through, is just as high at almost 40 percent. These tax rates have barely changed since 1986, the last time tax reform was passed, while other countries have continued to lower their rates. The U.S. rate makes it impossible for businesses to compete with foreign competitors in countries such as Canada (26.3 percent), the U.K. (20 percent), and Ireland (12.5 percent).
On top of these high rates, businesses are also subjected to the consequences of a worldwide system of taxation implemented under current law. The U.S. is one of only six OECD countries that still uses this system, forcing businesses to not only pay taxes to the country where the income was earned but then again to the U.S. This leaves U.S. companies at a clear disadvantage to companies in other countries that have moved toward territorial taxation in order to increase business incentive and competition.
- The tax code is enforced by an inefficient and untrustworthy IRS. In recent years the Internal Revenue Service has proven it is unable to fulfill its most basic duties to taxpayers. The agency has become synonymous with corruption and misconduct due to their mishandling of personal information and direct targeting of conservative individuals and groups. For example, in the three year span between 2009 and 2012 the IRS only granted tax-exempt status to one conservative non-profit organization while giving numerous to left-leaning groups.
IRS officials have also falsely claimed that they are woefully underfunded, stating that they were, “struggling to keep the lights on.” They used this as an excuse for being unable to provide adequate services to taxpayers such as answering their calls. They did however, have enough funding, footed by taxpayers, to pay $1,000 an hour for a high profile law firm to perform one audit.
President Trump rolled out his tax plan Wednesday to fix these issues that have been plaguing Americans for years. His plan makes the tax code both fairer and simpler, reducing the number of tax rate brackets from seven to three, narrowing to 10 percent, 25 percent, and 35 percent. This drastically decreases the needless complexities in the current code. Additionally, the plan would reduce the corporate tax rate from 35 percent to 15 percent allowing businesses, large and small, to finally be able to compete at home and abroad. These changes would re-energize our economy as well as streamline the cumbersome, outdated tax code.
Simplifying the tax code through President Trump’s plan will effectively reduce the need for the IRS. For what needs remain, the House GOP “Better Way” tax reform blueprint outlines the implementation of an innovative, citizen-first IRS. This includes a “Taxpayer Bill of Rights” that enforces a taxpayer’s right to confidentiality, quality of service and grants them the ability to appeal a decision made by the IRS. This ensures that IRS employees will be held accountable for their actions and safeguards taxpayer information. With a “service first” mission, taxpayers will have access to an agency structured specifically with their best interests at its core.