To understand why simplifying the tax code and reducing the tax burden on the American people makes sense, a history lesson is in order: Following President John F. Kennedy’s tax cuts back in the early '60s, the economy added 9.3 million jobs. And when President Ronald Reagan cut taxes in 1981, per-capita disposable income rose by $2,715.
In other words, cutting taxes creates jobs and puts more money in your pocket.
This alone should compel Congress to act. But there are other reasons for elected officials to roll up their sleeves and do something Congress hasn’t done in a generation.
For one, our current tax code favors the most fortunate and well-connected. It’s more than 4 million words long and requires 6 billion hours of taxpayer time to comply, placing a tremendous burden on individuals and small businesses.
But for those able to afford well-paid lawyers and accountants, the tax code provides an abundance of deductions and loopholes. In fact, according to one report, there are more than 4,000 tax lobbyists alone working for special interests in Washington, D.C. How many of them are working for you? Probably none.
No wonder a poll taken last fall found that a whopping 72 percent of Americans believe the economy is rigged.
But with calls to simplify the tax code growing, you can expect many of these same lobbyists to lock arms with special interests to make sure that their lucrative special tax breaks and subsidies remain in place.
What we need is principled lawmakers to step up and take on these special interests. Congress must enact comprehensive reform that creates a simpler, flatter, and fairer tax code.
They can start by reducing the number of income brackets and exemptions so complying with the tax code is easier and more affordable. Among the most innovative ideas out there is making filling out taxes as easy as filling out and sending in a postcard. This is exactly the type of bold thinking that lawmakers need to embrace. Tinkering around the edges just won’t do.
Then they can eliminate the unfair special favors and handouts that rig the economy in favor of the powerful and well-connected, and undermine fairness.
And when it comes to lowering taxes, policymakers must lower rates across the board. This includes easing the tax burden on hard working families, but also on corporations and businesses that are largely responsible for the lion’s share of job creation and economic mobility. Today’s corporate tax rate, the highest in the industrial world, encourages businesses to move overseas and costs jobs here at home.
Of course, opponents of tax reform are ready to fight tooth and nail to preserve the status quo that includes a 35 percent corporate tax rate and benefits them at our expense. But as Ronald Reagan once said, “you can’t be for big government, big taxes, and big bureaucracies and still be for the little guy.”
Montanans need our lawmakers to act decisively and not shy away from this fight.
U.S. Rep. Greg Gianforte, R-Mont., did an admirable job in communicating the idea that tax reform will be crucial to the Montana economy before taking office, now he has a chance to prove it.
Sen. Jon Tester, D-Mont., on the other hand, appears to be an unreliable ally for tax reform. Often calling for an end to corporate tax loopholes but opposing efforts to lower rates in a misguided effort to punish the rich because in some plans they, too, would receive a tax break. Sen. Steve Daines, R-Mont., meanwhile has been a consistent champion of a lower, simpler, tax code.
Montana families and small businesses need all of our representatives to lead on this issue. They need to act decisively and boldly to push for tax reform. We cannot let slip one of the clearest opportunities in recent history to do something that has eluded Congress for more than three decades.
David Herbst is the state director for Americans for Prosperity