Newspaper article Roll Call

Bloomfield: Tax Overhaul -- Triple Bypass or Triage?

Newspaper article Roll Call

Bloomfield: Tax Overhaul -- Triple Bypass or Triage?

Article excerpt

For the first time in three decades, Congress is scrubbing up to perform surgery on our unfair, incomprehensible and anti-economic growth tax code. President Barack Obama has made his proposals. The chairmen of the two tax-writing committees in Congress, Rep. Dave Camp, R-Mich., and Sen. Max Baucus, D-Mont., titled a recent high- profile joint op-ed, "Tax Reform Is Very Much Alive and Doable.'

Whether Congress performs a triple bypass through fundamental tax reform or if it just performs triage on the worst tax provisions remains to be seen.

Fundamental tax reform would replace our U.S. income tax with a consumption tax. Examples of a consumption tax are the European value added tax or state retail sales taxes. A uniquely American consumption tax could be crafted suitable to our economy, politics and times. Implicit would be provisions to prevent too much "regressivity' or creation of a "money machine.' It would be fairer - reward Mr. Thrift rather than Mr. Spendthrift. It would be simpler than our current tax code, which the IRS cannot easily explain or administer. It would facilitate economic growth by exempting all saving and investment from taxation: Mr. and Mrs. Middle Class would not be penalized when saving for a home, their children"s education or a secure nest egg for retirement. American businesses would not be penalized for innovation, investment and job creation.

A U.S. consumption tax in place of our current income tax would be ideal. Recognizing current political reality that tax reform may be limited to the income tax, here are three simple "do"s' to maximize economic growth and job creation:

* Do: Lower individual and corporate income tax rates. The U.S. corporate tax rate, at 35 percent, is uncompetitive and the highest among OECD countries. Move toward a "territorial' tax system to avoid multiple taxation by different countries. Most economists believe lower tax rates for individuals and corporations would minimize chasing tax loopholes and stimulate economic growth.

* Do: Be careful about "fixing' the income tax. First, look at fair, fundamental spending cuts that don"t jeopardize economic growth to "pay for' tax reform. …

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