Once again this year the college basketball tournaments, often referred to as “March Madness,” provided thrills and excitement to basketball fans. The tournaments featured the drama of close games, overtime buzzer-beaters, Cinderella stories and underdog victories, all the way to the Final Four. Our annual April Madness – filing our income taxes – has no drama, no Cinderella stories, and the only underdog is the taxpayer. The “Final Four” are likely the only dollars you will have left after April 15. It’s April Madness time again.
There is good news and bad news regarding taxation at the federal and state levels when compared to the situation one year ago.
The first good news is that the 2003 tax rate cuts on income, capital gains and dividends have produced historical economic growth, and that growth is projected to last into 2006. Gross Domestic Product has grown for 17 consecutive quarters, the unemployment rate is lower than the decade rates of the 1970s, 1980s and 1990s and manufacturing productivity is rising. These and numerous other measures of economic growth have caused tax revenue from businesses and individuals to increase over 10 percent from the same period last year.
Second, many states are considering tax and spending limitation legislation to rein in out-of-control spending and return wasted tax dollars to the taxpayers. Wisconsin, Ohio, Michigan, Georgia and Texas are just a few of the states where taxpayers have finally said enough is enough. Constituent-led grassroots movements in these and other states are shining the light on decades of wasteful spending at the state level and demanding accountability.
The third piece of good news is that support is growing for complete replacement of the tax code with a national consumption tax. More and more taxpayers are demanding action from their representatives in Congress, and their representatives are listening.
Just one year ago, there were 33 sponsors and co-sponsors of HR 25, The FairTax Act, in the U.S. House. Now there are 53 supporters, and new co-sponsors are joining every month. In the Senate, Senator Saxby Chambliss (R-GA) was the lone sponsor of the FairTax Act, S 25, one year ago. Senators Tom Coburn (R-OK) and John Cornyn (R-TX) now join Senator Chambliss as co-sponsors. The word is spreading about the overwhelming benefits to our economy and our wallets when we replace the nine-million-word tax code mess with the fair and simple FairTax.
The first example of bad news regarding taxation is that Congress still has not had the courage to make the 2003 rate cuts on income, capital gains and dividends permanent, and they haven’t permanently repealed the estate tax. As noted above, the 2003 tax rate cuts are responsible for the stable and growing economy. Yet Republican leadership in the House and Senate continues to face unwavering opposition to further tax rate cuts from Democrats and even some Republicans who continue the class-warfare claim that low taxes somehow hurt the poor and middle-class. They repeat this lie despite the fact that two million jobs were created in 2005, and virtually every American who wants a job can find one.
Another story of bad news is that the income tax code becomes more complex each year. Our income tax code is so complicated that many tax-preparation professionals cannot accurately file tax forms. A March 2006 story in USA Today indicated that 29 companies this year have already admitted to accounting mistakes on their tax forms, including the tax preparation firm H&R Block. H&R Block was forced to restate earnings after underestimating its fiscal year 2004 and 2005 earnings by $32 million.
An April Wall Street Journal story reported that tax preparation firms are also failing to accurately complete their clients’ tax returns. The Government Accountability Office (GAO) found that 10 of 19 commercial tax preparation outlets failed to report all income supplied by undercover GAO investigators, and some neglected to claim all the deductions available. What was the Senate’s response to the GAO findings? Instead of getting to work on creating a tax code that even the professionals can decipher, the Senate held hearings that will likely result in more regulations on the tax preparation industry. This will only mean more complexity and costs passed on to taxpayers.
The bottom line is that the income tax code is a disaster. More regulations and tinkering with deductions, credits and income brackets will only make the disaster worse. The slam-dunk fix for the income tax code mess is to completely replace it with the FairTax.
Stop the madness.