George Gibbs Center for Economic Prosperity

Dr. McClure: Comprehens⁠i⁠ve ⁠t⁠ax reform long overdue

By: Dr. J. Robert McClure / 2017

In 1913, the 16th amendment to the United States Constitution made legal the ability for the federal government to levy and collect a tax on the income of every working citizen. The length of that amendment is 30 words.

While the U.S. Constitution has 4,543 words and theBible has roughly 700,000, the federal tax code is more than 3.7 million words. Most citizens would rather endure a root canal without Novocain than attempt to decipher our nation’s tax code.

Americans acknowledge, however, that taxes are a part of our social contract. We provide the government with a portion of our income, and in return, the government provides for our national defense, executes public services, and promotes the general welfare.

It has been more than 30 years since the federal government last passed what we would call a tax reform package. In 1986, members of both parties came together with President Reagan to significantly change the structure of our tax system – reducing rates, eliminating “loopholes,” and increasing certain exemptions.

Over the course of the past 30 years, bureaucrats, special interestsand career politicians have all turned a good thing into a Washington thing – expanding the code to a 75,000-page hydra that nobody can fully comprehend. Each year thousands of changes are made. As a consequence, more than six billion (with a b) hours are spent every year working to comply with this monster.

President Trump says one of his top priorities is tax reform. It’s important to note he is asking for comprehensive reform, as opposed to basic tax cuts or changes at the margin.

Here are three concepts, JMI’s “Three C’s,” we hope to see in any aggressive tax reform package:

1. Complexity:The existing tax code is too long and too cumbersome. Over the years, it has been deluged by both parties with thousands of loopholes, special interest giveaways, and complex schemes that allow for increased tax avoidance. The best approach to comprehensive reform would maintain the KISS principle, “Keep It Simple and Succinct.”

2. Continuity:These days it seems everyone has a definition of what “fairness” means. Comprehensive reform should seek to eliminate giveaways and preferential treatment of specific industries, groupsand special interests. Get rid of loopholes, most exemptionsand corporate welfare. Without those in place, rates can come down significantly.

3. Consistency:There are few things we like less than a lack of consistency. The same holds with taxes. Overall, we recognize taxes are a part of our social contract. What we crave is a reasonable degree of consistency for both us and our business community. Comprehensive reform should both lower rates and broaden the tax base.

The 17th century French statesmenJean-Baptiste Colbertonce said, “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest amount of hissing.” Washington, D.C., will consistently attempt to pluck as many feathers as possible from taxpayers.

It’s important to hold our leaders in Washington accountable for bringing a much needed boost to our economy by finally tackling comprehensive tax reform.

Robert McClure is the CEO of the James Madison Institute.