Tax reform turns 30
Taxpayers are saddled with a tax code that hasn’t been overhauled since 1986. But comprehensive tax reform and bipartisanship is possible.
On Oct. 22, 1986, Congress and the White House came together in a rare display of bicameral, bipartisan cooperation to pass comprehensive tax reform. Republican President Ronald Reagan worked with a split Congress (Republican Senate and Democrat House) to accomplish the largest overhaul of the tax code in the United States.
The anniversary of the Tax Reform Act of 1986 provides a perfect opportunity to make the case once again for a major overhaul of our tax system.
The tax code is broken. Coming in at more than 2 million words, the tax code has been growing for more than 60 years when it was less than 500,000 words in 1955. The expansion of the tax code has led to greater complexity, and has led to more time and money spent by taxpayers on compliance.
Individual taxpayers are not the only ones feeling the pain of a broken tax code. Large and small businesses face the burden of a 40 percent corporate tax rate, the highest corporate tax rate in the developed world. The 40 percent rate is much higher than the global average of 23 percent and is chasing away jobs and investment from the United States, as corporate inversions increase as companies look to shift the burden of taxes to friendlier tax climates like Ireland or Canada.
The recent inversions should be a signal to Washington that tax reform is necessary. But, instead of pushing for a reduction in the corporate tax rate, the Obama administration is pursuing new regulations like the Department of Treasury’s 385 regulations that seek to punish the private sector.
There is some good news for taxpayers as the 30-year anniversary approaches. First, House Ways and Means Chairman Kevin Brady, R-Texas, released a blueprint for tax reform titled “A Better Way for Tax Reform” earlier this year. Brady’s blueprint would simplify the code, reduce rates for individuals and businesses, scale back the Internal Revenue Service, and provide an economic boost by giving money back to taxpayers.
Congress is only half of the equation to getting reform done. The president must also play a key role in passing tax reform. With an election looming, the presidential candidates also need to talk more about tax reform.
While Donald Trump has supported a plan for reform that falls mostly in line with the House blueprint on the individual and corporate side, Hillary Clinton has merely alluded to raising rates on the wealthy and not changing much of anything else. The candidates also differ on the inheritance tax, with Trump pledging to repeal it and Clinton promising to increase the rate.
The tax code represents the past, and the more complicated and bloated it remains the worse off taxpayers will be. Washington should use this weekend’s anniversary of tax reform as an inspiration to make reform happen again. After 30 long years, taxpayers deserve a code that works for them.
David Williams is president of the Taxpayers Protection Alliance. This has been adapted from InsideSources.