Years from now, if not after next year’s elections, historians may wonder how the GOP squandered a wonderful opportunity to pass meaningful tax reform. While I am not privy to all the back door machinations in Washington, outward appearances certainly suggest the ruling party is kind of disinclined to work with itself, let alone those on the opposite side of the aisle.
I could be wrong, but I doubt it.
While no one really likes paying taxes, they are necessary in a civilized society. I won’t give you a laundry list of those government services which I don’t believe the private sector would provide, but they are many. Still, our collective tax codes are outrageously complex, to the point of disrupting the free flow of capital throughout the economy and incenting individual and corporate inefficiencies. To that end, from what I have read, even the IRS has estimated it costs the American economy roughly $400 billion per year just to comply with the tax code.
To put that into perspective, $400 billion is just a little less than twice the annual economic output in Alabama. Why would you not want to try to make a dent in that number? That is unless you are a tax attorney, preparer or something along those lines?
Earlier in the year, the talking heads said to expect some kind of tax reform package by August. Well, August is now here, and the New York Times has recently written the Administration wants a bill on the President’s desk “by Thanksgiving.” Okay, I suppose we are working on government time, but the current headlines make one wonder whether even that is realistic.
Admittedly, common sense would suggest wholesale, fundamental reform of the tax code is probably not going to happen any time soon, regardless of who holds the reins of power. It is far too complex and heavily laden with special interests and, yeah, politics. So, a complete overhaul is out the question. You don’t have to understand Washington, just human nature.
Now, if I feel that way, why was I hoping for some kind of reform? Well, because it seems so apparent to me this would benefit the U.S. economy, which would, in turn, benefit our society and, ultimately, government tax coffers. I have scoured the data and found one thing to be pretty much true across the board and time: tax receipts increase when the economy grows and wealth expands. We can debate tweaking marginal tax rates for the highest of income earners and this or that tax bracket, and probably never come to a concrete conclusion. I can provide data which, on paper, would suggest or defend both sides of any argument. That isn’t my point.
Nor I am advocating slashing tax rates, and increasing exemptions and deductions across the board. If low taxes alone were the cure to what ails us, Alabama would be one of the richest states in the union.
In the end, doing what I do for a living, I see a steady diet of 2% economic growth for as far as the eye can see. I also see how our complicated, and often punitive, tax code inhibits the free flow of capital throughout our economy and financial markets. It is beyond ridiculous.
So, if we are satisfied with the former, let’s keep things the way they are. If not, let’s get to work on doing something about it, and knock off the back biting.
(Read the article as previously published in the Montgomery Advertiser on August 21st, 2017)