TPA Submits Public Comments on Individual and Corporate Tax Reform to Senate Finance Committee

Tax Day 2015 is this week and there’s no better time to remind Washington that the need for real and comprehensive tax reform is critical. The tax code continues to be extremely complicated, as TPA’s recent interviews on the streets of DC (see video here) showed. Congress needs to act in way that will both to increase investment for American businesses and have a positive impact for working families nationwide. This morning, Taxpayers Protection Alliance submitted public comments to the Senate Finance Committee on both individual and corporate tax reform. TPA encourages others to comment at Individual@finance.senate.gov and Business@finance.senate.gov.

See TPA’s comments below:

INDIVIDUAL:

April 13, 2015

Distinguished members of the Senate Finance Committee:

The Taxpayers Protection Alliance (TPA), representing millions of taxpayers nationwide, submits the following comments as you consider how best to institute individual tax reform into any comprehensive overhaul of the current tax code.

Comprehensive tax reform is one of the most important things that Washington can do right now for the American people and the U.S. economy. Right now, as people from all over the country are filing their taxes at the last minute it is in your power to do something to make sure that the tax system in the United States can work for the taxpayer, and not against them.

Individual tax reform will be the key to any overhaul of the tax code and can be a boon to working families who have struggled to comply with a tax system so complex that it takes billions of hours and dollars annually to comply.

One of the biggest problems with the tax code today that has plagued individuals and married couples is the sheer complexity of the code. The massive amounts of rules and regulations that have become a part of the tax code over time have made it both timely and costly for taxpayers to file their returns each year.  The tax code is long and complex:

• The current tax code has 3.95 million words.  To put that in perspective, the novel War and Peace has 544,000 words.
• A 2014 report from The Tax Foundation revealed that individual filers spend 1.35 billion hours and $20 billion on tax compliance annually.
• A study released last week from the National Taxpayers Union Foundation showed that  “compliance with the federal income tax cost the economy $233.8 billion in productivity last year.”

Washington has failed to act on making the tax code simpler for working families, the tax code has continued to grow and become a behemoth over time. Congressman Mac Thornberry (R-Texas) recently noted that, “There has been no major tax simplification passed by Congress since 1986, but since that time, over 14,400 amendments have been made to the tax code.”

The evidence of the need for a comprehensive overhaul of the tax code is very clear but not only does it come from reports and statistics, it comes from everyday taxpayers who can tell you themselves that the tax code is broken and it’s hurting them and the economy. TPA recently talked to average folks here in Washington, D.C. and what they had to say is very important for Congress to hear, especially at a time when April 15^th is upon us and elected officials are asking the public for their thoughts on tax reform. This simple exercise of asking people what they thought about tax reform was revealing in that it showed the desire for a simpler code that works for taxpayers, and not against them.

Recently, Senators Marco Rubio (R-Fl.) and Mike Lee (R-Utah) released their plan for comprehensive tax reform, the Economic Growth And Family Fairness Tax Reform Plan, or as it is becoming known as, the Rubio-Lee plan. This is a plan that TPA has praised and believe provides a path forward to meaningful tax reform that will benefit individuals and the economy overall. The plan cuts rates for individuals to pre-Obama levels and puts forth a simple two-bracket system for individuals and married couples.

The plan would also eliminate the death tax, something that is long overdue and would help future generations share in the success that their families have spent a lifetime building. The plan helps to simply the tax code and makes it easier for taxpayers to file each year, while at the same time providing an economic boost by encouraging investment in America through other reforms.

Americans from all walks of life and political leanings are ready for real tax reform. For the past 29 years, instead of seeing more done on tax reform to simplify the code we have seen the opposite, a massive expansion of rules and regulations that have cost the taxpayers time and money and have ultimately contributed to a loss in productivity for the overall economy. TPA urges Washington to use this moment on comprehensive tax reform to simplify the code and listen to what individuals are saying about the best way forward on tax reform.

CORPORATE:

April 13, 2015

Distinguished members of the Senate Finance Committee:

The Taxpayers Protection Alliance (TPA), representing millions of taxpayers nationwide, submits the following comments as you consider how best to institute corporate tax reform into any comprehensive overhaul of the current tax code.

There is broad agreement on corporate tax reform and this may be due to the fact that United States has a 39.2 percent corporate tax rate, the highest corporate tax rate in the world.  The United States has retained that dubious status since April 1, 2012. Having the highest corporate tax rate is an unwanted distinction, and it has become a major hindrance on the nation’s economy.

Having the highest effective rate among developed countries should give lawmakers pause knowing that it has made it more difficult for businesses to operate when they are being burdened with what has been effectively the highest corporate tax rate in the world.  This burden is disturbing considering that not only are businesses weary to do business in America due to the staggering corporate tax rate, but those that are here are reluctant to expand within the United States.  This trepidation to expand is because of a slew of statutory taxes that would essentially take a large portion of the hard-earned profits and give it to Washington.

A 2013 study from Ernst & Young commissioned by the RATE coalition detailed how the high corporate tax rate impacts economic output for businesses and earning power for working Americans. The results are discouraging:

• The average statutory foreign corporate tax rate of the 19 countries analyzed will have fallen nearly 35 percent between 1988 and 2015, when all currently scheduled changes will be fully in effect.
• In the long run, the U.S. economy, as measured by GDP, is estimated to be smaller by between 1.5 percent and 2.6 percent if the current differences in corporate tax rates remain.
• In today’s $15.7 trillion economy, the long run impact on the U.S. economy is equivalent to a reduction in U.S. GDP of about $235 billion to $345 billion each year.
• In the long run, real wages would be about 1.0 percent to 1.2 percent lower than they would have been otherwise.

TPA has been urging Washington to overhaul the tax code for many years, and we have specifically discussed the importance of moving on corporate tax reform so that the economy can grow because of an encouraging corporate tax policy that welcomes innovation and competition.  As America has stood still with tax reform, other nations have aggressively worked to reform their business tax codes resulting in an average rate of just 25 percent among OECD nations – a full 10 percentage points lower than the current U.S. corporate rate.

The high corporate tax rate not only causes damage from a domestic standpoint, but it also hurts foreign investment. Foreign countries are deterred from investing in the United States while at the same time encouraging U.S. companies to relocate. From 2000 to 2011, the U.S. lost a net of 46 Fortune Global 500 company headquarters to other, lower-tax countries in Europe and Asia. The loss of these headquarters not only creates a loss of significant, often higher-paying jobs, it also dismantles what is usually the centerpiece of a community.

The solution is simple: ensure the rate is competitive and fosters innovation and competition for businesses in the United States. The responsibility is now on Washington to accomplish this lofty but achievable goal.  It is encouraging to see the recent activity on tax reform and real attempts at outreach both inside and outside Washington, from CEOs to the average voter. The question now shifts to what kind of action will be taken, if any at all. TPA will continue to push for meaningful corporate tax reform and we hope that this public discussion on comprehensive tax reform leads to substantive reforms from Congress.