Why A Major Tax Overhaul Is Easier than Minor Tax Reform

Posted: Aug 15, 2017 12:01 AM
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Some think that a big win on tax reform is a pie-in-the-sky dream. But the truth is that it will be easier to overhaul the tax code than it will be to tinker around the edges.

Our tax code is more than 70,000 pages long. The typical American does not really know how much is being taken out of their paychecks, whether that will be enough to cover all their tax debt, how much of a refund they will get for overpaying, or what their final tax bill will be -- not even as a percentage of what they make.

Some have even less certainty about their tax situation. Small business owners and those with “side hustles” have to manage the income they get without an employer taking money out of their checks for taxes.

This uncertainty is not because people don’t know how to manage their money or are trying to dodge the laws. The issue is that the tax code is so complex that few people have time to dive in and research all the legal jargon to truly understand it. Small business owners – and everyone else – are so busy that it just makes sense to spend hundreds or thousands of dollars to hire someone who (hopefully) understands the tax code and can fill out the forms accurately. And at least they will help you deal with the IRS if they get it wrong.

Let’s take a look at how we got here. Did Congress pass a 77,000-page tax code sometime at the beginning of our history? No. The tax code has ballooned to its current size through special carve outs for special interest groups: the solar lobby, the gas lobby, the tech lobby, the train lobby, the beer lobby, the milk lobby, the tobacco lobby, etc. Every industry has lobbied members of Congress to get support for policies that reduce their tax burdens.

Another reason the tax code has snowballed to its current state is because senators and representatives in Congress hear their constituents want a tax break for industries that are prominent in their states or districts, and they wheel and deal with other members to get them passed. “I’ll vote for yours if you vote for mine.” And you would have to be a fool to think reelection does not play a part in this equation.

Recent reports reveal that some Republican members are concerned that going for substantive tax reform instead of just lowering a rate or increasing a deduction here and there will slow momentum. (I am assuming they are talking about all the incredible momentum from our big win on repealing ObamaCare!)

But the fact of the matter is that it’s the other way around. Trying to rescind a carve out here, an exemption there and a credit there will drag out and ultimately end without passing. But a simpler, flatter, fairer tax code that is much, much less than 77,000 pages will be easier to write and easier to pass – and can overcome the allure of special tax treatment for special interests in the states and districts with its huge potential to grow our economy faster than in the last eight years.

This kind of fundamental tax reform should broaden the tax base, lower and consolidate individual tax rates, reduce corporate tax and investment tax rates, simplify the tax code, include repatriation of overseas cash, and be budget neutral. 

Reform like this would give our economy a much-needed kick in the pants and benefit virtually everyone in the country.  This simple fact should be enough to convince members of the House and Senate to give up their special treatment for their industries and corporations to benefit their entire state or district -- and the country.

Jon Meadows is press secretary at FreedomWorks.