Dear Members of the Committee on Ways and Means:
Since the last major tax reform in the U.S. nearly 30 years ago, significant changes have taken place in the composition of taxpayers, businesses, and the economy. The tax code has added over 30,000 pages, the U.S. corporate tax rate has become one of the highest in the world at 39.1 percent, and credits, loopholes, and deductions have seen a 44 percent increase. While there is little debate among Americans that major tax reform is needed, the larger, unsettled issue concerns how a comprehensive measure can be achieved. Diverging policy opinions and objectives has led to prolonged inaction, as Congress is given the task of picking winners and losers in what often seems to be a zero-sum game. However, if America is serious about tax reform, the goals must be established and the features of a workable system must be identified. The …show more content…
Reducing the federal deficit should involve both cutting expenditures and raising revenues. Many policymakers have taken the position that tax reform should be revenue neutral, that is, revenue should neither increase nor decrease, and average tax rates should remain roughly the same across the income spectrum. However, some critics argue that the revenue neutral template that characterized the Tax Reform Act of 1986 is outdated and runs counter to modern economic theory and research. These arguments stress the current problem of income inequality and the need for increased tax progressivity, issues which will be discussed below. An aggressive effort to trim tax preferences could increase federal revenues by billions of dollars annually, as the money could be used to lower tax rates and reduce future deficits. Taming deficits in this manner will help steer the nation away from another economic crisis and keep the federal debt from reaching unsustainable
Since the last major tax reform in the U.S. nearly 30 years ago, significant changes have taken place in the composition of taxpayers, businesses, and the economy. The tax code has added over 30,000 pages, the U.S. corporate tax rate has become one of the highest in the world at 39.1 percent, and credits, loopholes, and deductions have seen a 44 percent increase. While there is little debate among Americans that major tax reform is needed, the larger, unsettled issue concerns how a comprehensive measure can be achieved. Diverging policy opinions and objectives has led to prolonged inaction, as Congress is given the task of picking winners and losers in what often seems to be a zero-sum game. However, if America is serious about tax reform, the goals must be established and the features of a workable system must be identified. The …show more content…
Reducing the federal deficit should involve both cutting expenditures and raising revenues. Many policymakers have taken the position that tax reform should be revenue neutral, that is, revenue should neither increase nor decrease, and average tax rates should remain roughly the same across the income spectrum. However, some critics argue that the revenue neutral template that characterized the Tax Reform Act of 1986 is outdated and runs counter to modern economic theory and research. These arguments stress the current problem of income inequality and the need for increased tax progressivity, issues which will be discussed below. An aggressive effort to trim tax preferences could increase federal revenues by billions of dollars annually, as the money could be used to lower tax rates and reduce future deficits. Taming deficits in this manner will help steer the nation away from another economic crisis and keep the federal debt from reaching unsustainable