Confusing, costly, and anti-competitive are words often used to describe the 3.8 million word U.S. Tax Code. A broad swath of economists, non-profit organizations, the American public and Congress’s two scorekeepers – the Joint Committee on Taxation and the Congressional Budget Office –understand that reforming our tax code means less debt, more jobs and a stronger economy.
The Case for Tax Reform
According to a recent Gallup survey, 93 percent of Americans favor tax reform that lowers tax rates and eliminates deductions and loopholes.
The non-partisan Joint Committee on Taxation (JCT) projected that a revenue neutral proposal to modify the individual income tax by broadening the tax base and reducing statutory tax rates could lead to an increase in GDP by as much as 3.5 percent in the long run.
Harvard economist Dale Jorgenson recently estimated that gains available from fundamental tax reform amount to as much as $7 trillion in current dollar terms (nearly 50 percent of our current GDP).
The Wall Street Journal reported that the bipartisan 1986 tax reforms “wiped out hundreds of billions of dollars in tax breaks and used the money to lower tax rates.”
The RATE Coalition, a bipartisan group that advocates for a simplified tax code with lower rates, said that the 1986 tax reforms “resulted in a revitalized economy and laid the groundwork for one of the longest and widespread economic booms in U.S. history.”
Tax reform of 1986 was the “sort of the unsung hero of the very good economic times we had for a long time,” according to Stanford economist and former Treasury Secretary George P. Shultz.
Scott Hodge from the Tax Foundation says similar tax reforms today – that is, reforms that reduce or eliminate certain tax expenditures and lower tax rates for all – “would greatly improve the nation’s prospects for long-term GDP growth” and “will lead to higher wages and better living standards for American citizens.”
The Heritage Foundation’s Curtis Dubay says “the economy would be stronger,” “more Americans would be employed, and wages would be higher.” That’s because a simpler tax code “encourages growth by removing the barriers” to “working, saving, investing, and taking on risk.”
Permalink: https://hatch.senate.gov/public/index.cfm/2012/11/the-case-for-tax-reform