Revise the Tax Law; Look at Personal Consumption
Byline: Saxby Chambliss, John Linder, Steve King and Kevin Brady, SPECIAL TO THE WASHINGTON TIMES
As the President's Advisory Panel on Federal Tax Reform prepares to send its recommendations to the Treasury secretary next month, we hope that it will propose to abolish our indecipherable and unwieldy income-tax code and replace it with a tax on personal consumption. Slowly but surely, large macroeconomic forces are pushing the federal government away from income-based taxation and toward consumption-based taxation.
As our tax code has grown more complicated in the last 15 years, compliance costs for both businesses and families have skyrocketed. According to IRS data for tax year 2003, 60 percent of people filing tax returns retained professional assistance to do so. Businesses, likewise, are incurring enormous tax-compliance costs themselves and passing these costs along to consumers in the form of higher and higher prices.
While current tax-compliance costs are estimated between $250 billion and $450 billion a year, these costs do not produce a new job, build a new plant or create a new invention. To the contrary, these costs are a dead weight on our economy, slowing it down and hindering its ability to expand. Adopting a tax on personal consumption will enable the elimination of these costs, effectively reducing the burden of America's tax system by $2 trillion to $4 trillion over the next ten years. This kind of stimulus will help America retain its role as the locomotive of the world's economy.
This year, there has been a growing debate about how best to ensure the long-term solvency of the Social Security program. The long-term financing problems facing Medicare are, in fact, far worse than those facing Social Security. Together, these valuable safety-net programs, financed by 158 million current workers, provide benefits to about 45 million retirees. Yet, when the baby boom generation retires, and the number of Social Security/Medicare beneficiaries doubles in only 35 years, the workforce will have grown by only 15 percent, to 180 million.
Moving from a payroll tax to a personal consumption tax provides both Social Security and Medicare with needed long-term financial solvency. …