Yellow Card: Tax Reform

TAX REFORM

“Will you commit to introducing and working to enact a tax reform plan that makes the tax code simpler, flatter, and fairer?”

Background

The tax code of the United States is more than 75,000 pages long, and the Internal Revenue Service has more than 2,000 forms and instructions. Americans spend over 6 billion hours preparing their tax returns every year, and more than $400 billion to ensure they’ve complied with the law.

And the complexity is increasing. According to the National Taxpayer Advocate, there were no fewer than 4,428 changes to the tax code between 2001-2010. That’s more than one tax change per day. Because the code is so complex, there are hidden compliance costs that one recent study estimated to be as high as $987 billion annually – that’s almost 40 percent of the amount of revenue collected annually by the federal government.

Money spent complying with the tax code is money not spent on more productive uses. Estimates of foregone economic growth range from a low of $148 billion per year to a high of $609 billion per year.

Even the Commissioner of the IRS, in testimony before Congress, called on lawmakers to simplify the code.

The vast majority of Americans agree that tax rates should be set so that enough revenue can be collected to fund the proper activities of government, while doing as little damage as possible to economic freedom.

A proper tax reform plan would: 1) raise the revenue necessary to fund proper activities of government at the lowest level possible; 2) have lower and fewer tax rates applied to a broader base; 3) minimize compliance and administrative costs, including time spent complying with the code.

For More Information

Heritage: A Tax Reform Primer for 2016 Presidential Candidates

Mercatus Center: The Hidden Costs of Tax Compliance

USA Today: IRS Commissioner Urges Congress To Simplify Tax Code

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