By J.C. Hernandez Sep 4, 2017
Our country has long been admired as a place where ordinary people can succeed by working hard and playing by the rules. But the American Dream is under assault by a government that rewards the wealthy and well-connected at the expense of the average citizen, leading 72 percent of Americans to believe that the “economy is rigged to advantage the rich and powerful.”
Few things contribute more to this sentiment than our nation’s broken tax code.
The last major code overhaul was during the Reagan administration, and in the years since it has become increasingly complex, burdensome to taxpayers, and riddled with special-interest loopholes. Our sky-high corporate income tax alone is estimated to have cost the United States up to 3 million jobs.
Fortunately, relief is in sight. With both Congress and the president united around the need for tax reform, we have a real chance to level the playing field and unleash economic growth that will benefit all Americans.
To start with, legislators can eliminate the billions in subsidies, special deductions and other loopholes that lobbyists have managed to sneak into the tax code for their powerful clients.
The government makes up for this revenue by shifting the burden onto others, including future taxpayers through excessive borrowing that will eventually have to be paid back.
Besides restoring fairness, eliminating special deductions will help cut down on the tax code’s maddening complexity.
Americans spend more than 6 billion hours per year simply trying to comply with the tax code, and 90 percent of us resort to using tax preparation software or hiring a tax preparer. But even the professionals struggle to follow the law.
In a 2006 study, the U.S. Government Accountability Office (GAO) had mock tax returns prepared at 19 different tax preparers.
The GAO found that “only 2 of 19 tax returns showed the correct refund amount, and in both of those visits the paid preparer made mistakes that did not affect the final refund amount.” In five cases, the preparer miscalculated the tax refund by nearly $2,000.
Individuals and businesses alike would benefit from a simpler code, and that can be achieved by cutting out deductions, reducing the number of income brackets, and eliminating the alternative minimum tax, originally aimed at the highest earners but increasingly affecting the middle class.
Moreover, all Americans would gain from lower tax rates.
Besides allowing families and businesses to keep more of their hard-earned money, cutting taxes would produce a stronger and more competitive economy.
Our 35 percent corporate income tax — the highest in the industrialized world — encourages businesses to invest abroad and leave American workers behind. The Congressional Budget Office (CBO) estimated that domestic workers bear more than 70 percent of the corporate tax burden.
A fairer, simpler, and less burdensome tax code is key to unrigging our economy. These same principles should be applied here in Virginia, where outdated and uncompetitive tax laws are taking their toll on workers.
This year, Virginia’s tax climate fell from 29th in the nation to 33rd — well behind our neighbors like North Carolina, Tennessee, and West Virginia. Economic growth has been sluggish, and for the past three years, more people have moved out of Virginia than have moved in.
At both the state and the national level, Virginians need relief.
Fixing our tax laws will spur growth and help attract jobs back from other countries and other states.
It will also help restore the belief that in our country, everyone has a fair shot at earning success.