By U.S. Sen. Chuck Grassley
Most Americans are relieved to see Tax Day fade into the distance. This year another taxing milestone takes a bit longer to reach the rearview mirror. Tax Freedom Day falls on April 24. That’s how long American taxpayers collectively will work into the year to fulfill federal, state and local tax liabilities. That means Americans work 114 days for the government and 251 days for themselves.
The number crunchers at the nonpartisan Tax Foundation say that Americans will work 43 days to pay their income taxes; 26 days for payroll taxes; 15 days for sales and excise taxes; 12 days for corporate income taxes; 11 days for property taxes; and, one week for estate, inheritance and other taxes.
That adds up to Americans putting in a lot of time for the government’s dime. Consider that federal tax receipts in 2015 are estimated to reach $3.28 trillion. It’s inconceivable for hardworking American households that Uncle Sam can’t make do with that much money pouring into federal coffers.
And yet chronic deficit spending creates an even bigger burden on the taxpaying public. According to the Tax Foundation, if you take into consideration future liabilities due to federal borrowing, Tax Freedom Day won’t arrive until May 8.
No matter one’s political ideology, time zone or zip code, Americans from all walks of life have strong opinions about taxes. It reminds me of the story of Goldilocks and the Three Bears. Some think taxes are too high. Some even think taxes are too low. But very few seem to believe taxes are just right.
This spring I invited Iowans to participate in an online tax survey to collect opinions on specific tax breaks and general ideas for reforming the federal tax code. As always, I appreciate the feedback I receive from Iowans. It strengthens the process of representative government. I’m currently reviewing the responses to incorporate in the recommendations my tax reform working group will make to the full Senate Finance Committee.
Just a snapshot of the responses paints a big picture: A majority of respondents want a simpler, fairer tax system. And yet, consensus splits between supporting a flat tax or favoring a national sales tax. And it gets even murkier with specific details as to which tax breaks to keep or eliminate. Retaining retirement savings vehicles and deductions for charitable contributions were ranked as high priorities in the survey. Likewise, most respondents gave a thumbs up to consolidating college expense tax breaks with some voicing concern about how federal tax breaks contribute to rising tuition costs.
The survey reflected widespread frustration many taxpayers feel about the tax code and the IRS. While the federal tax code is too complicated, the IRS doesn’t make it any easier on taxpayers. A 2012 report by the National Taxpayer Advocate estimated American taxpayers spend 6.1 billion hours and $168 billion to file their taxes.
Tax simplification would kill a few birds with one stone.
• It would help close the $385 billion tax gap by making it harder for tax cheats to hide or underreport income, while making it easier for law-abiding citizens to comply.
• It would foster stronger economic growth as individuals and businesses would focus less on diverting resources to lower tax liabilities and focus more on increasing investment, growth and productivity.
• It would help reduce the overbearing influence of the IRS. Yes, the federal tax-collecting agency administers a complex tax code. But it creates even more complex rules and regulations that force many taxpayers to hire somebody else to figure it out. One respondent suggested that tax forms should be comprehensible to high school graduates. Many reported they are fed up with the IRS, saying the agency has lost credibility for understaffing customer service, providing inconsistent and unreliable responses to their inquiries and targeting taxpayers for their political views.
The IRS likes to blame its troubles on a tight budget. Instead of spending more money on customer service and helping taxpayers file their taxes, the IRS fritters away millions of dollars on employee bonuses, office furniture and public opinion research. It says it’s underfunded whereas it’s arguably misplacing priorities at taxpayers’ expense.
Simplifying the tax system is anything but simple. Reforming the federal tax code will take broad, bipartisan support to make it happen. It’s not impossible, but without strong leadership from the White House, it’s improbable. Presidential leadership is necessary to build a consensus among the American people and Congress behind a specific tax reform plan.
Those of us who’d like to see a simpler and fairer tax system also must consider how changes will affect economic growth, global competitiveness, savings and investment and job creation.
Fixing the tax code to suit everyone’s tastes is a tall order. Simplification is a good place to start.
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