Taxes & Budget

It seems that with the unpleasantries of April 15th and the Internal Revenue Service fresh on everyone's mind that this is a perfect time to further the notion of real, honest-to-goodness systemic tax reform.

Why? Well, consider this - according to the Tax Foundation [link]:

• It costs small businesses $724 to comply with the monstrous federal tax code for every $100 it pays in income taxes
• Individuals and business spend 5.8 billion hours each year in tax compliance at an estimated cost of $198 billion, and equivalent of a 76 year total life-span of 8,700 Americans
• Over the last five decades, the tax code has increased in size more than 500%, and tax regulations by 939%, totaling somewhere around 60,000 pages
• Tax Freedom Day – the day when America has earned enough to pay the total national tax bill - in 2007 is April 30 – twelve more days than in 2003, the year of the last big tax cuts, and rapidly approaching the latest historic tax-freedom day of May 5, 1999
• For every $1 paid in taxes, Americans spend an additional 20 cents in compliance cost

The Congressional Budget Office estimates that making decisions based on the tax code instead on what makes good financial sense could be costing our economy $200 billion in lost opportunity, and the CBO further estimates direct compliance costs to American businesses total between $400-$500 billion.

A Line of Sight believes Congress and the American people need to have a serious discussion about the nature and direction of the tax code. Certainly government needs to fund services, but the system of collecting tax should not be an undue additional cost to bear that stifles economic expansion, reduces productivity, limits family prosperity, and inhibits wealth creation. America's place as the economic superpower of the world is in large part dependent upon public policy that supports entrepreneurship, self-motivation, and free-market principles. Notably, many other nations of the world have adopted economic policy that is far more encouraging than what currently exists in America. As stated in this issue of A Line of Sight there are signals [read "Fix it Until it's Broken, Part II"] from Capitol Hill that even higher taxes and more punitive policy and regulation are likely on the way.

When systemic tax reform is discussed, two plans dominate public opinion – a flat or uniform tax on income, or a consumption tax that would tax sales at the point of purchase. In the spirit of full disclosure, I was originally a proponent of the Flat Tax argument for years. However, after further study and consideration while in Congress, I came to believe that the consumption tax, referred to by its sponsors as the Fair Tax, is indeed fairer and simpler. It would provide a huge boost to our national economy and has dramatically more likelihood of keeping the tax code simple for years to come. After all, we started with a flat tax on income with the ratification in 1913 of the 16th Amendment.

That said, I will stipulate that both the Flat Tax and Fair Tax have compelling reasons for support rather than the IRS code as it currently exists. Recognizing that all revenue measures must originate in the House, and to help stimulate the conversation about the Flat Tax and the Fair Tax, A Line of Sight has invited the House sponsors of each of these revolutionary pieces of legislation to write a brief explanation of their proposals for this issue.

Congressman Michael Burgess (R-Texas) serves as the Vice-Chairman of the Republican Policy Committee [read his biography here]. Burgess is passionate about the Flat Tax, but his interests are much broader than just tax policy. Before coming to Congress, he was a very successful doctor of obstetrics and gynecology for 21 years and is proud to have delivered over 3000 babies in his career. Not surprisingly, he has dedicated a great deal of his focus in Congress to healthcare issues, and currently serves on the House Energy and Commerce Committee. For those looking for more information, The Flat Tax by Robert Hall and Alvin Rabushka is available in a new and updated version through the Hoover Institute as www.hooverpress.org.

John Linder (R-GA) is the House sponsor of the Fair Tax, [read his biography here] and also co-author with Neal Boortz of "The Fair Tax Book" which can be purchased on Amazon.com. Congressman Linder serves on the Ways and Means Committee, which has jurisdiction over tax policy. Along with Neal Boortz, Rep. Linder has worked tirelessly throughout the nation to increase awareness and support of the proposal. In previous sessions of Congress, he served on the Rules Committee, which has jurisdiction over all legislative bills that the House considers for action. Linder is also a doctor, having had a career in dentistry before coming to Congress, and is a veteran of the Georgia state legislature.

A Line of Sight is grateful to both Congressmen Burgess and Linder for their efforts to further good economic policy and tax reform as well as their dedicated service in Congress.