Taxes

Congresswoman Jenkins in a Ways and Means Committee Hearing on Taxes

The current tax code is too complex, too costly, and takes too much time to comply, frustrating individuals, families and businesses trying plan their future with reasonable certainty.  The tax code has changed so often—15,000 times since the last major tax overhaul—it is impossible to keep up with and confusing for families.  

Given the complexity created by the ever-changing tax code, it is easy to understand why compliance with it has become too costly.  According to the National Taxpayer Advocate, in 2008, taxpayers spent $163 billion complying with tax rules.  Taxpayers find return preparation so overwhelming that 90 percent resort to a professional preparer or using tax software to help prepare their returns.  Beyond these direct costs that can be measured in time and money, the complexity of the tax system is a tremendous source of frustration to American taxpayers, reduces the system’s transparency, and undermines trust in its fairness.  

I think it is safe to say that the current tax code is broken and the hardworking families of Kansas deserve better.  A pro-growth tax system should be simple, efficient, and fair.  A simple tax code is essential to promoting economic efficiency and reducing the interference of taxes with a families’ everyday decision-making.  The House Ways and Means Committee, of which I am a member, has begun a series of hearings to consider fundamental tax reform.  I am committed to fighting for a tax code that promotes, not prevents, job creation, and is simple and responsive to the needs of all taxpayers.  

Small Business

Tax complexity continues to burden Kansas small businesses.  Small businesses are responsible for seven out of every ten new jobs in America, yet they are increasingly forced to devote their limited resources to complying with the tax code.  Small businesses should be allowed to focus their energies and resources on creating jobs, not filling out yet another form for the IRS.  In fact, a Small Business Administration study found that the tax compliance burden is 67 percent higher for small businesses than large businesses. 

Starting and operating a small business is a risky venture made more difficult by the tax code.  The majority of small business owners simply cannot afford to hire a dedicated tax professional, forcing owners to handle the task of compliance or requiring expensive professional assistance from an outside accounting firm.  Small business owners spend nearly 2 billion hours and $18 to $19 billion annually complying with the tax code.  The burdens of the present tax code on small businesses must be addressed in any future comprehensive tax reform.  

Competitiveness

America’s high business taxes are affecting our competitiveness, wages, and living standards.  In 1986, the U.S. led the world in cutting business taxes to make our economy more conducive to job creation. Since then, nearly every other industrialized country has cut its business taxes while we stood still.  Today, only Japan has a higher business tax rate than the U.S.   In 2010, 27 countries cut their business taxes to make their economies more competitive and attractive to investment.  Countries – such as Korea, Taiwan, Hong Kong, and South Africa – have announced that they will cut their corporate taxes, and even the Japanese have said that they will study the idea. The wages and living standards of American workers are threatened as long as our business taxes remain above the world average. It is time for the U.S. to lead again.

The problem with the corporate income tax is that corporations are not taxpayers – they are tax collectors. Taxes on corporate income are borne by shareholders, employees and customers. Investors pay the cost in diminished returns. Workers pay the cost in lower wages. And consumers pay the cost in higher prices. Workers in particular could benefit from a reduction in the corporate tax rate. A recent CBO study concluded that “domestic labor bears slightly more than 70 percent of the burden” of the corporate income tax.

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