The Need for Tax Reform

THE NEED FOR TAX REFORM -- (House of Representatives - April 13, 2005)

Mr. SCOTT of Georgia. Mr. Speaker, I want to just, first of all, thank our distinguished Minority Whip, the gentleman from Maryland (Mr. Hoyer) for the distinguished leadership that he has been providing on this issue.

Mr. Speaker, I rise today to discuss what is one of the what I call tragic burdens, one of the greatest tragic burdens on the American family, and this is the costly, complex Tax Code. This Friday, April 15, is tax day for millions of Americans who will spend countless hours this week trying to comply with our unbelievably complex tax laws.

At the outset, I want to make something very clear, Mr. Speaker, to the American people tonight. Let me make it clear that it is Democrats who you will see tonight who are taking the leadership. It will be Democrats on this floor of the Congress tonight who are taking the leadership to make our tax system fairer, less complicated, and simpler.

Now we all know that over the last 4 years this government has been getting bigger under the Republicans. The deficits have soared under the Republicans. Social Security is coming under direct attack and attempting to be dismantled and privatized by the Republicans. And our tax system has gotten more complicated, more unfair and complex under the Republicans.

There has been a growing unfairness in the Tax Code and an astronomically exploding national debt, trillions upon trillions of dollars, and growing each year.

But, Mr. Speaker, it is Democrats who are here

tonight providing the leadership for tax fairness, for tax relief, for tax simplification and, most importantly, for reducing taxes on working American families.

Americans are double-taxed by the time and expense that it takes to do their taxes. For example, individuals, businesses, tax-exempt public and private entities spend nearly 6 billion hours complying with the Tax Code.

Nearly 60 percent of taxpayers currently use a tax professional to prepare their taxes, compared to only 40 percent in 1990. A typical taxpayer knows that a competent tax professional does not work for free, so it is costing taxpayers an estimated $100 billion each year in accounting fees and the value of their time to complete their tax returns.

Now, Mr. Speaker, I am reading a very interesting book by Thomas Friedman, and it is called ``The World is Flat''. And in this book, he talks about a phenomenal situation that takes place largely because of the paperwork and the complexity of our tax returns and preparing them.

He points out very clearly in a chapter called ``While I Was Sleeping'' that over in India a burgeoning industry is taking place, preparing Americans' taxes, outsourcing jobs. In 2001, it was 50,000; 2002, it was 100,000; 2003, it was 400,000; and 2005 it is projected to be over one million. Not just jobs, but our precious preparation of our taxes being outsourced.

I am here to tell you that our failure to simplify our Tax Code is causing a major transformation of our accounting profession. Taxpayers are losing money due to the complexities of the system.

The Government Accountability Office estimates that Americans overpay their taxes by an estimated $1 billion a year because they fail to claim deductions. About a quarter of Americans who are eligible for the Earned Income Tax Credit fail to claim it due to complexities.

Mr. Speaker, this is terrible. It is a tragedy, and we must make our Tax Code easier for the American people, make it easier for them to figure it out.

As an entrepreneur who started a successful small business, I was not surprised to learn that the IRS estimates that the average self-employed taxpayer has the greatest compliance burden of almost 60 hours to prepare his or her taxes. It is no wonder that small business owners overpaid their taxes by $18 billion in 2000 and 2001, according to the GAO.

This is unacceptable, Mr. Speaker. We do not need to take this any further. Considering these statistics, is it any wonder why 70 percent of Americans recently polled believed their Federal taxes are too complicated?

In that same Associated Press poll, about half of the respondents would prefer to visit the dentist than prepare their taxes.

Another tax problem that Americans will discover is, as our distinguished leader, the gentleman from Maryland (Mr. Hoyer), pointed out, that the Alternative Minimum Tax which will have to be paid by nearly 3 million taxpayers this year, that number will explode to 30 million by 2010 according to the Congressional Budget Office. By 2010, the AMT will ensnare one-third of all households and 97 percent of families with two children and incomes between 75,000 and 100,000, according to the Brookings Institute.

Now, in January our distinguished President announced the establishment of a bipartisan panel to provide alternatives to simplify the Tax Code, which I certainly join with my leader in commending him. This advisory panel will submit to the Secretary of the Treasury a report of its recommendations by July 31, 2005; and I hope that the advisory panel will consider tax fairness as well as tax simplification. And let us all work together. The current Tax Code is riddled with special advantages for various subgroups of business people.

Mr. Speaker, I serve on the Financial Services Committee, and I am deeply worried about the finances of our country. A simplified Tax Code would reduce tax cheaters and cut down on compliance expenses for all taxpayers. I believe that it is time for Congress to clean up this Tax Code and provide some relief to families and small businesses.

Yes, we Democrats are taking the leadership on this as you see tonight. But this is bipartisan. The American people are looking for Democrats and Republicans to join together and make our tax preparation simple, easy to understand. The American people deserve this, and the American people are going to get it with us working together to bring tax relief, to bring tax simplification of the Tax Code to the American people.

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