There have been so many changes to the tax code over the past decade that it is now 10 times the size of the Bible, but with none of the Good News. That factual statement usually gets a good laugh.
But what isn’t funny is the effect that constant tinkering with the tax code has had on the people who pay them, and on the economy.
The last time we reformed the tax code was 1986. That was 28 years ago — and America, once the beacon for investment, hiring and strong wages, is now falling behind — and it risks falling even further behind unless we take action.
This weak economy cannot even produce enough jobs for all the kids coming out of college today. In fact, there are a record number of young Americans who are moving back in with their parents instead of launching their own careers and starting families of their own.
The time to act is now. America cannot afford to wait.
Recently, I released what a simpler, fairer tax code actually looks like. The guiding principle is that everyone should play by the same rules — your tax rate should be determined by what’s fair, not by who you know in Washington. Here is what it would look like:
First, the tax code will be made simpler — so every family can do its own taxes confidently, without fearing an audit, or wondering if someone else who can afford an expensive accountant is getting a better deal.
For example, there are 15 different tax breaks for education—nine for current expenses, two for past expenses and four for future expenses. The IRS instructions explaining it all come to almost 90 pages. That isn’t a tax code designed for working families; it is a tax code designed to make money for accountants.
Last year, my Democratic counterpart on the Ways and Means Committee, Sandy Levin of Michigan, and I created 11 bipartisan working groups to tackle different parts of the tax code. One of those, headed by Diane Black, R-Tenn., and Danny Davis, D-Ill., looked into those education provisions. After months of work, the leaders of the working group recently came forward with a plan that consolidates four of these provisions into one improved credit, making it easier for families and students to afford a college education.
Paired with more commonsense reforms like increasing the standard deduction and the child tax credit will mean that nearly 95 percent of the country can get the lowest possible tax rate by just filing the basic IRS 1040A form — no more itemizing, no more keeping track of all those receipts, and no more filling out all those extra schedules, forms and work sheets.
Second, the tax code will be made more effective and efficient by getting rid of special-interest handouts, which will mean lower tax rates for individuals, families and all businesses. Under this plan, over 99 percent of tax filers will face a top tax rate of 25 percent—allowing small and large businesses alike to expand operations, hire new workers and increase benefits and take home pay. On the individual side, there will be an introductory bracket of 10 percent.
Nonpartisan, independent economists at the congressional Joint Committee on Taxation have already analyzed this plan. According to those estimates, after this streamlining of the tax code, the size of the economy will increase by $3.4 trillion over the next decade, or roughly 20 percent compared with today. This will lead to nearly two million new jobs—and producing up to $700 billion in additional federal revenues that can be used to lower taxes even further or reduce the debt.
What does this mean for you and your family? Because we will have a healthier economy, wages will rise. With more income but lower tax rates, the average family in Montcalm County (median income of $40,707 for a family of four) will have on average an extra $570 in their pocket at the end of the year. That is money you can spend on gas, groceries and school books, not on our complex tax code.
Third, make the tax code fairer and more accountable. That means no more hidden provisions that benefit a favored few, and no more tax increases to fuel more spending. If loopholes are closed, Americans should get the benefit by way of lower rates.
Tax reform needs to be about strengthening the economy and making the code simpler and fairer. That’s what Republican President Ronald Reagan did when he worked with Congress in 1986. We need to get to work and repeat that success.
U.S. Congressman Dave Camp, R-Midland, represents Michigan’s 4th congressional district, which includes Montcalm County. He is also chairman of the House Committee of Ways and Means.
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