The opinions expressed in this column are those of the writer and not necessarily of the Davis Clipper.
When Bob Bennett first ran for election to become a U.S. senator from Utah, his campaign was energized by a single (and often shown) television commercial. On the TV ad, Bennett said what we all knew: the federal income tax form was a pain. Paying your tax bill, he said, should be far less complicated Р and at that point he held up a simplified form the size of a postcard.
Almost everyone complains about the complexity of our tax system, but it seems more special interest deductions and credits are enacted each year. The average American doesn’t understand the form and the instructions, a blessing for local tax preparers, and tax software designers.
Now a new tax reform proposal is being shopped around. While it wouldn’t exchange the tax form for Bob Bennett’s postcard, the ideas in the proposal make a lot of sense Р and maybe that’s why both Democrat and Republican leaders are dismissing it.
The proposal offered by GOP Rep. Dave Camp, chairman of the tax writing Ways and Means Committee, would do away with the current seven income tax brackets. Under his proposal, 99 percent of Americans would pay either 10 percent or 25 percent; only individuals earning more than $400,000 would pay the highest rate (35 percent).
To decrease the time-consuming process of itemizing deductions, the proposal nearly doubles the standard deduction for taxpayers. (Rep. Camp suggests that only 5 percent of Americans would choose to itemize under his plan.)
Most taxpayers could still deduct mortgage interest and the deduction for children. However, the plan would close the loopholes for U.S. companies in exchange for generally lower, more stable tax rates.
Rep. Camp claims that his tax reform concept would create more than $3.4 trillion in economic growth and add nearly two million new jobs. Who knows if these numbers are plausible? But anything that shaves off pages of the tax code should get an earnest ear from Congress.
But apparently that’s not going to happen. Both parties are turning away; special interest lobbies are dead set against any process that takes away deductions and credits from specialized industries. (In Utah, Sen. Mike Lee is instead pounding the pavement for a large increase in the child tax credit, effectively meaning that many larger families would pay no federal tax at all. The conservative Wall Street Journal criticized Sen. Lee, noting that his idea is “expensive and does nothing for economic growth.”)
The income tax system is a mess. One friend saves all of his McDonald’s receipts since he’s never sure whether or not he can deduct his Big Mac and fries from his taxes. Another regularly gets audited because he deducts medical expenses less than the itemized deduction threshold.
It shouldn’t be that difficult. I believe tax confusion is a lot more prevalent than tax evasion. Special interest groups will never allow Congress to pass a simple “flat tax.” Rep. Camp’s proposal means to “create lower tax rates and a fairer more efficient code.” How refreshing!