Near the end of February the nation's lawmakers will be arguing about taxes again, because the Payroll tax cut is set to expire. Instead of another band aid, we should be talking about real comprehensive tax reform. We should throw out the old system altogether and start over again.
Everyone hates the Income tax system. It is complicated (72,000 pages long) and people spend between $250-$300 billion each year just for tax preparation. Simplifying the system would save taxpayers the equivalent of 20% of their taxes. There is also a lot cheating going on. Preventing cheating would provide another $300 billion.
One good aspect of the Income tax system is that it is progressive and could be used to reduce income inequality, but that isn't working too well. Billionaires pay a lower tax rate than their secretaries pay. The income tax system penalizes wage earners and rewards speculators who use money to make much more money.
The tax system is riddled with thousands of tax loopholes that special interests take advantage of. Because of these loopholes 2/3rds of corporations pay no taxes at all, even though the corporate tax rate is higher than any other nation and corporations are making record profits.
We need to balance the budget, but we also need to stimulate the economy, rebuild our crumbling infrastructure, rebuild our education system, provide for universal health care, and save the environment. All of the States are hurting and we are laying off teachers, policemen, firefighters and letting criminals out of prison.
The super-rich who used to have a 90% tax rate, now pay 17%, and corporations which used to provide 20% of the revenue now only pay 9%. Our taxes are lower than they have been in 60 years even though we are still in the middle of a war. We have a revenue problem not a spending problem.
This should be the year for Comprehensive Tax Reform. Of course there is resistance. All but 13 of the Republicans in Congress have signed a pledge never to raise taxes for any reason. There is also considerable resistance from all of the special interests who paid millions to lawmakers to put the thousands of loopholes in the tax system.
Of course normally in an election year, nothing would happen, but this year Obama has some leverage. At the end of this year, unless there is comprehensive tax reform, the Bush Tax Cuts will expire and the tax code will return to the tax code under Clinton which resulted in three years of surpluses. Another incentive is that Congress needs to do something to avoid sequestration. Sequestration is scheduled to make across the board cuts of $60 billion to the military and another $60 billion to domestic discretionary spending. To prevent sequestration Congress needs to do what the "Super Committee" was not able to do, find $120 billion in savings from a combination of budget cuts and new revenue.
http://www.phillyburbs.com/news/local/co...To prevent the type of partisan gridlock that condemned the "Super Committee" to failure, the President should call for a tax reform panel that consists of an equal number of Republicans, Democrats, and independent economists, who have not received any money from special interests. Each group should then craft there own separate proposals, and then they should use preferential voting to select their favorite (3 points) second choice (2 pts.) and least favorite proposals. The proposal with the most points would be the one approved. This procedure would force everyone to cooperate and compromise to attract those second choice votes. The final proposal should just have a simple up or down vote with no filibuster allowed.