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LATHAM REPORT: HOW IS THAT TAX CODE TREATING YOU?

f t # e
Washington, Apr 14, 2013 | comments

Dear Friend,


One of the great privileges and duties of my job representing Iowans in the U.S. Congress is listening to people share their views on the most pressing issues affecting their lives. And in all of my conversations with constituents, not once have I ever heard anyone say, “You know, I really like the way our tax system works.”

All I hear is quite the opposite, especially now at the end of tax season. Each year, Americans spend absurd amounts of their time and money — 6 billion hours and $160 billion — trying to comply with a tax code that is impossibly long and complex. In fact, nine out of every ten taxpayers are forced to use a professional tax preparer or tax preparation software to do their taxes.

It’s no wonder. While no one has to recall all 4 million words of the tax code or the some 4,400 changes made to it in the last decade, trying to navigate the tax filing process alone is daunting. Failure to do it correctly could mean missing out on claiming a deduction that could save substantial money. It could also mean a penalty: a fine in a less costly case, or an audit in a nightmare scenario. From any angle, noncompliance comes at a cost, and many Americans go to substantial lengths to avoid it.

Yet no one should have to do so in order to make their government work for them.

It’s clear that we need a serious overhaul of the tax system. Lucky for us, history says that such reform is possible. More than two and a half decades ago, President Reagan worked on a bipartisan basis with Congress to pass into law the Tax Reform Act of 1986, which simplified the tax code by eliminating numerous loopholes, decreasing the number of tax rates wage-earners had to pay at different incomes, and lowering overall tax rates on individuals.

This reform eased the tax burden that taxpayers had to shoulder, and it also made the tax system fairer and more straightforward. These benefits were bonuses enough — but they go without mentioning the boon to the economy. In the first two years after these reforms became law, America added 6.3 million new jobs.

Considering that our economy is still limping along and added a dismal number of jobs in March — the President’s own former top economic adviser called the news “a punch to the gut” — we could use a dose of this job-creating tax reform.

The good news is that the House-passed budget features one. This proposal, which passed on March 15 with my support, would implement a tax system that’s flatter, fairer and simpler for hardworking taxpayers, farmers and businesses. It would close special-interest loopholes and lower overall rates to help encourage the job growth that this economy sorely needs.

I am also a cosponsor of the Tax Code Termination Act (H.R. 352), which would give our tax policy a truly fresh start. This bill would call on Congress to repeal the tax code in full, start with a blank sheet of paper, and enact a new one by no later than July 2017.

Contrast this with the President’s approach, which calls for tax hikes, not tax reform. The budget plan he released would increase taxes by more than $1 trillion and would hardly begin to address the tax simplification that would save tax filers their annual headaches. That’s not good for job creators, taxpayers or our struggling economy.

Americans are fed up with the current tax code. According to a recent poll, just 9% think we have the best tax system in the world. That number should be no less than 100%, and we can get there with genuine tax reform.

Best Wishes,
f t # e