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Avoid The Fiscal Cliff, And Then Reform The Tax Code

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

I can’t think of an issue that more perfectly captures the national debate than the one right now regarding the expiration of the 2001 and 2003 tax cuts. At the end of this year, current tax rates will expire and taxes will go up if nothing is done. The powerful Way and Means Committee, the chief tax writing committee in Congress of which I am a member, has already taken the lead and passed through the House of Representatives yet another extension of current rates for all taxpayers.


Some would have you believe this debate is about pitting rich and poor against each other. In truth, however, the expiration of current tax rates (and our subsequent plunge over the fiscal cliff) would have dire consequences for everyone, particularly the middle class. To be sure, failure to extend current rates would prove calamitous for our already fragile economy.

Recent surveys of small businesses have shown that economic uncertainty is hurting our fiscal recovery. From new, unnecessary regulations and taxes imposed by the President’s healthcare law to executive agency rule-making, almost no sector of the economy has been left untouched. And, as I travel throughout the 24th District, the primary message I receive from local small businesses is they want to know that their success will not be punished by the federal government.

Whether it’s a local manufacturer, a healthcare professional, or small mom and pop shop, they all seem to agree: The federal government needs to get out of the way. They talk of how they are unable to expand their operations and make hiring plans because of lingering uncertainty. They are unsure of new taxes and regulations the current administration is contemplating and they want current rates to be extended, if not made permanent.


The uncertainty fostered by this debate surrounding tax rates has brought to a head a critical issue that has momentum both on Capitol Hill and around the country, including the 24th District: the need for comprehensive tax reform. If achieved, comprehensive tax reform for individuals, families, and businesses can and will unleash a robust recovery in the American economy. What does reform mean? This means lowering all rates, eliminating most deductions, and simplifying the code into fewer tiers.

Comprehensive tax reform is a win-win for all involved. For individuals and families, this means fewer hours preparing tax forms and more discretionary income. For small businesses, this means less time spent with accountants and more time planning expansion and hiring. And for advocates of smaller, more accountable government, this means far fewer loopholes and a less intrusive IRS.

The fiscal cliff is something we must address by extending current rates in the near term. But it also allows us to have a debate about tax reform and the proper size of government. Does anyone really believe that the current tax code is desired by and beneficial to job creators and families? A tax code that requires an army of tax professionals to navigate does no one any good.


Yes, loopholes should be closed. Yes, most deductions will be eliminated. But with our economy slowly plodding along, families struggling to keep their heads above water, and American companies at a competitive disadvantage, I can’t think of a better time or reason to enact bold tax reform that lowers rates, simplifies the code, and brings clarity to a tax system that has grown out of control.

There is no doubt that Congress must avert the fiscal cliff. If, however, the goal continues to be punting the problem for another year, we will have missed a clear opportunity to make reforms that will help American families and businesses get back on the path to prosperity.

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