Tax reform is a leading issue that will be
hotly discussed in the next few years. America’s resurgence affords
opportunities to make important adjustments to government functioning and
spending that can improve opportunities for long-term growth. Now is not the
time to fall into a trap of complacency only because the economic position of
the U.S. is improving. Reforming the tax system helps both businesses and
citizens understand their tax situations and create more trust with government.
Depending on what perspective a person comes
from will determine whether or not they are an advocate of tax reform. Many
times these differences are created based upon demographics. For example, a
person making $40K a year will have a different perception than someone making
$500K a year. Simplification offers an
opportunity to put them both on the same playing field.
Corporations and individuals will also have different
perspectives. Corporations will desire to lower their liabilities which are
good for business and society while individuals may want to lower their own tax
expenditures allowing them to spend the savings and further economic growth.
Both positions have merit and would likely be served by tax reform.
The
Average American Perspective
The tax code is complex and dissatisfaction with
how government is spending American tax payer money has always been a contentious
issue. Tax reform affords an opportunity to be more transparent with the
average American who may be wondering what happens to all that money and whether
or not the tax burden is unfairly falling on their shoulders.
People are naturally distrustful of things they
don’t understand. Almost no one understands the tax system and this includes
accountants as well. Taking individual tax information to three different accountants
results in three different answers. A simplified system will allow individuals
to save their money and file on their own without the need of expert help.
The
Business Perspective
Businesses also get bogged down by complex
corporate tax rates. Taxes are a complex and hotly political issue but ultimately
create a risk for business. Companies that want to invest in the U.S. will need
to hire expensive attorneys and analysts to determine their tax liability on
projected projects. This creates a significant risk for businesses that would
be able to make better projections with a simpler tax code.
A complex tax code also encourages political
mischief and crony capitalism. Complex systems are partly the result of
politics. Interested stakeholders put pressure on politicians to create tax
breaks, incentives, and loop holes that help a few powerful entities over the
needs of others; the more complex the system, the more opportunity for
political hanky panky. Keeping the tax system simple also keeps it transparent.
The tax structure is likely to become a big
issue over the next few years as both political parties try and make some sense
out of government spending and revenue generation. Tax reform is one of the
issues that can lead to some level of agreement even though each party has their
own particular take on the subject. At
present the discussion is only just starting and a viable plan should be
developed that can move through the legislative process.
