| Tax Relief & Simplification |
Our current economic plan (or lack of one) is taking our country down a 10-year path to recovery. But as the old saying goes, “Those who don’t learn from history are doomed to repeat it.” In the 1930’s, the federal government under President Roosevelt increased government spending to levels our nation had never seen.
What was the result?
In 1939, at the end of the decade, FDR’s own Treasury Secretary Henry Morgenthau summed it up by saying:
“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and now if I am wrong somebody else can have my job. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started. And enormous debt to boot."
Our country could be on a 10-month recovery plan if we would focus on removing barriers to competitiveness – this includes addressing the enormous burden of our current tax structure.
First, the federal government must end the bailouts, repeal the failed stimulus spending, and eliminate wasteful and duplicative programs. Then we must quickly act to lower the tax burden on Americans who pay federal taxes (for the 2009 tax year, 47 percent of U.S. households paid no federal income tax leaving the remaining tax burden on 53 percent of households).
Our tax structure does not provide a fair playing field for American workers and industries to compete in today’s global market. Aside from being too complex, our tax structure places an unfair burden on businesses trying to prosper, therefore discouraging entrepreneurs. We need to find realistic ways to simplify and bring equity to our tax code.
FAIR TAX
By replacing the various federal income taxes (personal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment and corporate taxes), the FAIR tax (H.R. 25) would implement a consumption-based national sales tax and a rebate to ensure no American pays taxes up to the federal poverty level.
By allowing workers to take home their entire paychecks (except where state income taxes may apply), we would enable workers to have more control over the money they earn. Because federal taxes would be paid on new retail items, Americans could decide when and how they spend their money, thus determining when and how much tax they would pay.
The economic benefits for our country would be significant as well. By removing all the embedded taxes associated with the production of new goods and services, America would become one of the most attractive places in the world to do business and our exports would soar.
Sunset the Tax Code
In order to make good on the promise to reform the tax code, Congress should consider dramatic efforts such as H.R. 982, Tax Code Termination Act, that would terminate the Internal Revenue Code of 1986, thus forcing Congress to act swiftly with an alternative system.
Until we achieve the political will in the United States to completely dismantle the IRS and replace it with a system such as the FAIR Tax, we must work within the current system to incentivize job creation and new economic growth opportunities for our businesses and industries.
Legislative Proposals
Here are just a few legislative ideas introduced during the 111th Congress that would help entrepreneurs launch more small businesses, the cornerstone of our economy.
H.R. 470, Economic Recovery Middle-Class Tax Relief Act (Rep. Garret)
H.R. 470 makes permanent the reductions in the dividend and capital gain tax enacted by the Jobs and Growth Tax Relief Reconciliation Act of 2003.
It would do the following: (1) reduce individual and corporate income tax rates; (2) repeal the alternative minimum tax for individual taxpayers; (3) allow inflation adjustments to the basis of capital assets in determining gain or loss; (4) reduce the capital gains tax rate for corporations; (5) repeal limitations on the expensing allowance for depreciable business assets; (6) make permanent the tax credit for increasing research activities; (7) extend the carryback period for net operating losses to seven years; (8) increase the child tax credit; (9) exclude from gross income in 2009 distributions from an individual retirement plan (IRA) and exempt IRAs from mandatory distribution requirements after 2009; and (10) increase the tax deductions for tuition and related expenses and for the interest on qualified education loans.
Finally, H.R. 470 would make 1 percent across-the-board rescissions in non-defense discretionary spending.
H.R. 4012, Commercial Real Estate Accelerated Depreciation (Rep. Tiahrt)
H.R. 4012 would create an economic incentive for construction of commercial real estate properties as well as renovations to existing properties. Under current law, cost recovery for most commercial property is depreciated over a 39-year period. H.R. 4012 would provide an accelerated depreciation period for new property, shortening it to five years – so long as the new commercial property is placed in service between January 1, 2010 and December 31, 2011. Additionally, H.R. 4012 would allow leasehold property improvements made during this time period to be eligible for a 10-year accelerated recovery period instead of the current 15-year recovery period.
H.R. 3844, Commercial Aircraft Bonus Depreciation (Rep. Tiahrt)
Incentives such as accelerated depreciation to encourage investment in capital equipment not only get our production lines moving again, but they also result in increased revenues. H.R. 3844 would extend the current bonus depreciation allowance for another two years and shorten the recovery period for noncommercial aircraft property from five to three years.
H.R. 446, EXPENSE Act (Rep. Sessions)
H.R. 446 would: (1) repeal the limitations on the expensing of depreciable business assets; and (2) allow taxpayers to elect a two-year recovery period for depreciable property.
H.R. 1040, Freedom Flat Tax Act (Rep. Burgess)
H.R. 1040 would transitions us from our current tax structure to a flat tax system.
H.R. 4781, Keeping American Businesses Competitive Act (Tiahrt)
H.R. 4781 would lower the top business tax rate from 35 percent to 22 percent. The United States currently has the second highest corporate tax rate of any industrialized nation, putting American workers and businesses at a huge competitive disadvantage. According to the Milken Institute, lowering the corporate tax rate to 22 percent could "create an additional 350,000 manufacturing jobs and increase total employment by 2.13 million."
With President Obama and Speaker Pelosi offering proposals almost every week to raise our taxes and crush U.S. jobs, we must do everything possible to counter their liberal policies and keep jobs in America. Our current business tax rate is the second highest of any industrialized nation and is forcing businesses to relocate. America loses millions of quality jobs when this happens.
We should work with the private sector to grow our economy from the ground up, not strangle businesses with more red-tape and higher taxes as proposed by the Obama administration. Cutting the business tax rate from 35 percent to 22 percent would send a resounding message around the world that America is the place to do business. Doing so would immediately spur unprecedented job creation across the country – unlike the failed proposals we see coming from the White House."
For more information from the Milken Institute on the economic benefits that would result from lowering the business tax rate as proposed by Tiahrt, click here.
Taxes that Inhibit Capital and cripple family budgets
• We should eliminate the double taxation of dividends
• Congress should pass the Small Business Expensing Act to increase the amount that small businesses may expense under section 179
• Value Added Tax (VAT) – the VAT unfairly targets low and middle income wage earners by assessing value on every production activity and passing the cost on to the consumer. Congressman Tiahrt has introduced a Resolution condemning the use of the VAT.
In the April 21, 2010, edition of the Topeka Capital-Journal, Congressman Tiahrt wrote:
As if the current tax system were not enough of a burden, we continue to hear rumblings from the administration about establishing a value added tax system patterned after Europe. The president has already signed into law a European-like nationalized health care scheme that will cost us $1.2 trillion with tax increases almost too large to comprehend. And now Washington Democrats are turning to countries such as France and Denmark for advice, including on how they can squeeze more money out of taxpayers. We have to wonder if the president is trying to groom America for a complete European makeover.
A value added tax, or VAT as it is called, would impose job-killing taxes on every stage of business production. When the government assesses value on every stage of production activity, low and middle-income wage earners suffer and consumers end up paying more for goods and services. What makes this tax especially egregious is that it's applied at multiple levels, which ends up masking the true tax burden from consumers.
Click here to read the entire op-ed by Congressman Tiahrt.
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