America is badly in need and deserving of “Tax Reform.” That’s what a coalition of taxpayer groups, think tank and trade association representatives and small business advocacy organizations dedicated to tax reform said at a press conference at the National Press Club in downtown Washington D.C. on April 15,th the deadline date for Americans to file federal taxes.
Several dozen individuals who represent constituencies from around the United States led by Grover Norquist, President of Americans for Tax Reform (ATR), made their goal clear. According to Norquist, “We’re trying to get to a single rate tax, a tax that hits at one time. Some people see that as a retail sales tax, some as a flat rate income tax that would tax income one time at one rate so that the government watches you earn a dollar, steals some and leaves you alone or watches you spend a dollar, steals some and otherwise leaves you alone but the same rate treated equally by the state and otherwise left alone.”
Currently, the federal income tax code is now over 60,000 pages in length; up 20,000 pages since 1995; up 10,000 pages in the last four years; and contains almost 1,000 new changes just from the 108th Congress.
The IRS now prints in excess of 1,000 publications yearly, over 500 of which are forms that can be required for filings.
The system is a morass of unwieldy contradictions and ambiguities and leaves most people at a loss to decipher. Without the use of sophisticated computer software most accountants and tax experts would not be able to navigate this current system. As a result, the cost of compliance to taxpayers is enormous.
The (non partisan) Tax Foundation reported recently in its 2005 “Annual Survey of U.S. Attitudes on Tax and Wealth” that the cost of tax code compliance is estimated to exceed $220 billion this year and the average time spent preparing an individual’s taxes to be just under 30 hours.
The survey goes on to say that most Americans feel that taxes are too high and too complicated. Furthermore, it treats most Americans inequitably. In 2004, 44 million people filed tax returns, but owed no federal income tax after deductions and credits.
Probably the most telling finding in the survey is: When asked to rate the value received from the government regarding the taxes that they paid, over 66% surveyed said they rated the value as poor or fair.
What do Americans think of the current federal income tax system? According to the Tax foundation survey, 77% feel that it should be completely overhauled or at least needs major changes.
Since the first of the year, President Bush seems to be honoring his campaign pledge to reform the American tax system. He has named a nine-person bipartisan Advisory Panel on Federal Tax Reform, co-chaired by former Sen. John Breaux (D.-La.) and former Sen. Connie Mack (R.-Fla.). The panel is to present options for reforming the Internal Revenue Code no later than July 31.
Breaux has said that the recommended options could include an overhaul similar to the sweeping legislation passed in 1986 or perhaps even a “new tax system,” likely featuring a consumption tax, such as a sales tax, or perhaps a flat tax, in which all income is taxed at one rate.
The advisory group is also stressing that Congress needs to quickly address the time-bomb known as the Alternative Minimum Tax (AMT), which was originally designed to prevent tax dodging by wealthy individuals and corporations. However, because so many Americans have increased their incomes, they will have to pay the AMT in addition to their income taxes. This year 4 million people will pay this tax. In five years that number will grow to 35 million.
Doing away with the alternative minimum tax could lower taxes on the middle class. Breaux said the problem with eliminating the AMT is that this would also reduce revenue by $1.3 trillion, thus making the already steep deficits even worse.
There’s no doubt that there appears to be a strong synergy among the President, the Advisory Panel on Federal Tax Reform and the coalition groups for tax reform. Awareness of the problems and strong public support for reform continues to increase. And, a sense of urgency engulfs this issue which could help to get Congress to work together and vote for constructive changes that are in the best interests of the American people.
Grover Norquist summarized the approach the coalition groups need to take when he said:
- “When you do politics you have to have bifocals. You have to look out where we are trying to get to. There is step-by-step tax reform and there is fundamental tax reform and there is no conflict between pursuing both of these at the same time. When you want to walk a long way away, you also gotta look at what’s in front of your feet. So you don’t trip and you have to keep moving forward. So, let’s get rid of the Death Tax, let’s end the double taxation of dividend income, let’s abolish the capital gains tax, let’s go to expensing rather than long depreciation schedules and let’s abolish the AMT. All of those are important and I take them in the order in which Congress is willing to pass them and we ought to push on all of those fronts. And, our long term goal is ‘one rate at one time.'”