Pointing to the billions of hours and billions of dollars U.S. taxpayers spend each year on tax compliance, the newly issued report by the President's Economic Recovery Advisory Board headed by former Federal Reserve Chairman Paul Volcker makes a compelling case for simplifying the U.S. Tax Code to ease the compliance burden on workers, families and businesses. Among the dozens of ideas described in the report for simplifying and improving the Tax Code are many of the key features of the Bipartisan Tax Reform and Simplification Act authored by Senators Ron Wyden (D-Ore.) and Judd Gregg (R-NH).
"Reading the report, it is clear that Chairman Volcker and the Advisory Board are aware of the significant benefits that millions of Americans would get out of reforming the tax code," Wyden and Gregg said. "The report showed that simplification is the key to a fairer and more efficient tax code, something we have made the cornerstone of our bipartisan reform efforts. This important report will be a great resource as Congress considers ways to make the tax code simpler, more efficient and more fair for taxpayers and businesses."
The report by the Volcker-led panel specifically includes the following provisions to simplify the Tax Code that are also proposed in the Wyden-Gregg bill:
* Eliminating the Alternative Minimum Tax which currently requires millions of Americans to calculate their taxes twice and pay the higher amount.
* Providing taxpayers with the option to get a pre-filled out tax form from the IRS to simplify the tax filing process. The State of California currently provides this option for state income taxes and the Wyden-Gregg bill would provide this option to all individual federal taxpayers.
* Raising the standard deduction amount to spare many taxpayers the additional burdens of recordkeeping and reporting for their itemized deductions. Wyden-Gregg calls for nearly tripling the size of the standard deduction which would result in 87% of taxpayers avoiding the need to itemize.
* Consolidating and simplifying the 18 current tax incentives for education as the Wyden-Gregg bill does.
* Consolidating and simplifying more than 20 provisions in the Tax Code that encourage savings for retirement and other purposes. Wyden-Gregg consolidates existing incentives to save into a new Retirement Savings Account and a new Lifetime Savings Account.
In addition to these simplification proposals, the Advisory Board's report describes a number of ways to reform the corporate Tax Code to improve economic efficiency and make US businesses more competitive in the global economy. These include:
* Reducing the corporate tax rate, broadening the corporate tax base and reducing tax expenditures. Wyden-Gregg lowers the US corporate tax rate from the current 35% top rate to 24%, bringing the US rate down from the 2nd highest in the industrialized world to a rate competitive with major US trading partners like Canada, Germany and France. Wyden-Gregg also broadens the corporate tax base by repealing dozens of special interest tax breaks.
* Creating more level tax treatment of debt and equity so that businesses don't have incentives to take on excessive debt burdens that make them vulnerable in times of economic distress. Wyden-Gregg creates a more level treatment of debt and equity financing by cutting the value of inflation from a corporation's interest deduction for debt financing.
* Reforming how US multinational corporations are taxed on their overseas earnings to reduce incentives to ship jobs and investment overseas. Wyden-Gregg reforms international tax rules to end incentives for multinationals to keep cash abroad and provides new incentives to encourage production, employment and investment in the US.
In addition to having many areas of common ground with the Volcker-led panel's report, the Wyden-Gregg bill has received positive feedback from a number of independent experts.
The Manufacturers' Alliance/MAPI Inc. reported that Wyden-Gregg would:
* Create nearly two million jobs;
* Create hundreds of billions of dollars in extra disposable income; and
* Reduce the federal deficit to just $300 billion by 2014.
The Heritage Foundation reported that Wyden-Gregg would:
* Create 2.3 million more jobs per year;
* Increase disposable income by $4,095 per year for a family of four;
* Raise foreign investment in the U.S. by an average $292 billion per year; and
* Boost real GDP by an average $298 billion per year.
The Urban-Brookings Tax Policy Center reported that Wyden-Gregg would:
* Make the federal tax system more progressive.
For more information on the Wyden-Gregg Bill, go to http://wyden.senate.gov/issues/issue/?id=FB5B603A-ED94-48A8-8FF1-C220C1052B3F
For the complete report from the President's Economic Recovery Advisory Board, go to http://www.whitehouse.gov/sites/default/files/microsites/PERAB_Tax_Reform_Report.pdf