By Michael C. Burgess
While nothing in this world is certain except death and taxes, death at least, appears to be less complicated.
This year marks the 100th anniversary of the federal income tax in America. Unlike a fine wine, the tax code has not aged well, and the current system has reached staggering levels of complexity. Just to give you an idea, every year Americans spend over 6 billion hours preparing their tax forms and well over $400 billion in compliance. Astonishingly, Americans spend about 30 percent of the total revenues collected by the Internal Revenue Service (IRS) just to fulfill their responsibility of filing. Additionally, the IRS has over 2,000 forms and instructions listed on their website.
And even the experts can't do it by themselves: former IRS Commissioner Doug Shulman finds the current code so complex that even he himself uses a preparer when filing. I think we can all agree that when an IRS Commissioner needs a third party to help file his own taxes, the system needs to be fixed.
Americans understand the need for income taxes that go towards paying for roads, a strong national defense or health care. However, Americans also insist on fairness: that everyone follows the same rules and everyone has the same opportunity. This notion should also apply to the federal tax code -- but it doesn't.
Why not? Because the U.S. Federal Code is loaded with opportunities for avoiding taxes and exploiting loopholes at the expense of everyone else. Behind every loophole there is a lobbyist.
This is why I've introduced the "Flat Tax Act," H.R. 1040 every year since being elected to Congress. The purpose of the bill is simple: flatten, simplify, and reform the federal tax code. My legislation follows the principle of choice and allows individuals and businesses alike to opt into a 17% flat tax as applied to income. However, those who want to remain in the current system can continue to file as before.
A faster, flatter, fairer tax structure would be simple -- tax returns would be done on a single page, perhaps even on a postcard. Gone would be the countless hours spent trying to determine whether military service or marital status will affect one's return; no more headaches trying to determine where estimated tax payments go.
Ready for how simple filing a tax return under the Flat Tax Act is? All you need to fill out is your name, personal identification, yearly income and a line for personal exemptions. To calculate, you multiply the 17% flat tax rate with your income and subtract taxes already withheld. That's it -- you're done. Less time than it would take to deposit a check at the bank.
In keeping with the all-American principle of fairness, the Flat Tax Act also includes an exemption for a family of four up to $46,100, or twice the federal poverty level of 2012. Including this exemption protects the lowest income earners in the country as they would only be subject to taxes on the amount that exceeded the deduction.
Yet another benefit of the Flat Tax Act is that it reforms not just the income portion of the code, but also eliminates federal gimmicks that stymie economic growth such as the Alternative Minimum Tax, capital gains taxes, the estate tax and the marriage penalty. This gets Uncle Sam out of the pockets of Americans, and shifts the burden away from our families and small businesses.
Today, several states have implemented a single flat tax. Americans from Utah to Massachusetts have realized the benefits of switching to a flat rate of tax as applied to their income. State revenues have increased because of a flat tax as well. Indeed, a single income tax generated so much revenue in Colorado that one state lawmaker actually proposed reducing the rate 10 years after its implementation. Likewise, in Indiana, the economy boomed after a flat rate went into effect in 2003.
This year, hopefully, Congress will take up the prospect of comprehensive tax reform. Tax reform is necessary and cutting taxes should be a priority -- but so should it be a priority to simplify the federal code.
As a physician, it's hard to think of better medicine for an ailing economy than replacing a broken system with a tax code that actually works. Let's consider how the right change could improve the most complicated of institutions, save time, money and peace of mind for the taxpayer, and most importantly, deliver enduring prosperity for all Americans.