No ordinary American needs to be told how expensive and time-consuming it can be to pay taxes, but perhaps their elected representatives in Congress do need a reminder – Tax Day should be just that.
Federal income tax filings were due Tuesday, and once again, the American people spent huge sums of their precious time and money attempting to comply with the demands of the federal government, unsure if they are doing so properly.
The pain of their constituents should be a call to action for Congress to enact comprehensive tax reform for the first time in three decades, simplifying the code and reducing the burden.
The average American spends thirteen hours and more than $200 to file their taxes, and nearly a third of all Americans pay a tax preparer to help them do so. Still, almost 70 percent worry they are not filing their taxes correctly. For young people just starting out, that figure is 80 percent. And these concerns are amplified for the millions of Americans who own a small business and seek to be the entrepreneurial engine of our economy.
Overall, Americans spend more than 6 billion hours complying with taxes each year, amounting to more than $230 billion in lost productivity. That is deadweight time and money that could be spent creating value in the economy or simply enjoyed at home instead of worrying about being chased down by IRS bureaucrats who not long ago were caught harassing people for their political beliefs.
But perhaps worse than the compliance burden of taxes is the cost of taxation itself. Americans will pay 31 percent of the nation’s income – more than $5 trillion – in taxes this year, with $3.5 trillion going to the federal government and another $1.6 trillion to states, according to the Tax Foundation.
That’s more than they will spend on food, clothing and housing – combined.
It seems the only people not bothered by these facts are the wealthy and well-connected who can afford a room full of accountants and lawyers to wade through the tax code on their behalf, the accountants and lawyers themselves, and of course the politicians and bureaucrats who stand to benefit from the government’s largesse.
But that is precisely what the American people revolted against last November: government that overburdens hardworking families, picks winners and losers, and benefits out-of-touch insiders at average Americans’ expense.
Tax reform is the perfect opportunity for Congress and President Trump to show the American people that they were listening.
The United States has the highest corporate tax rate in the developed world. It is stifling investment and job creation and making the U.S. an exceedingly unattractive place to do business. On the individual side, rates remain too high for millions of families, and the sheer number of brackets not only makes tax compliance confusing, it also creates a disincentive for Americans to earn more.
An equally important element of tax reform must be eliminating corporate welfare. Politicians rail against corporate welfare on the campaign trail, but the problem has only worsened over time. Congress should take this unique opportunity to eliminate the credits and carve-outs that benefit certain businesses over others and force higher rates on the rest of the country.
Moreover, corporate welfare is demonstrably ineffective at producing growth when compared to a tax code that is flat and neutral, and it is simply unfair.
Finally, taxes cannot sufficiently be addressed without taking a look at the other side of the coin – spending. Cutting taxes for some should not be “paid for” by increasing taxes on others, as some have proposed with the “border adjustment” consumer tax. Instead, Congress must live up to their past promises to reduce spending, and Americans for Prosperity has identified $2 trillion in savings between tax and spending reforms to help them do so.
Trump ran on a promise to “drain the swamp” and create jobs, and Republicans in Congress have for years resisted President Barack Obama’s tax increases and reckless spending. Now, together, they have an opportunity to do right by the people who elected them by passing comprehensive tax reform to ease the burden and lower the cost of government.
Akash Chougule (@AkashJC) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is the director of policy at Americans for Prosperity.
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