Editor's note: This column was previously published in a newsletter produced by Zions Bank.
How much could our economy benefit if Americans had an additional $160 billion, along with 7.6 billion man-hours, to invest annually? Currently, taxpayers drain that amount of money and time each year in feverish efforts to prepare and file their taxes in alignment with our overwrought tax code. While taxes are necessary for a stable society — funding crucial investments in infrastructure, education, welfare, and defense — Americans have the right to a navigable and consistent system. Simply put, the complexity of the code is constraining our economic prosperity.
April 15 has become an annual pinnacle of grievance for corporations and individuals alike because of our country’s arduous tax code. Our last major national tax reform occurred in 1986, and since then, lawmakers have made over 15,000 changes to the code. In that time, the Form 1040 instruction manual has swelled from 14 pages to over 40 pages. However, after many years of rhetoric, empty promises, bad ideas and excuses, a viable solution for a simplified tax code may finally be on the horizon.
In late February, Rep. Dave Camp from Midland, Mich., introduced a new plan to simplify and disaggregate our tax system. Seeking to balance funding levels with reasonable demands on America’s individuals, families, and companies, lawmakers are discussing the idea’s potential impact on our economic growth.
At minimum, the revised system would make filing taxes easier and less expensive. The proposed plan consolidates today's seven tax brackets into three main brackets and eliminates many tax deductions and exemptions. Proponents of the plan also assert that it would: 1) boost economic growth by lowering the income tax rate and thereby incentivize people to work more, 2) reduce many of the burdens associated with filing taxes and 3) remain revenue neutral — meaning the government will still get the same amount of money.
This new plan also revives a decades-old, overarching question: Is it the role of government to dictate where each of us invests and spends our money? Our current system of deductions and tax incentives asserts that the answer is yes. It allows deductions for such things as providing a foster home for pets, pregnancy tests, and, believe it or not, clarinet lessons for children with overbites. While the idea of using deductions and write-offs to focus economic activity makes sense theoretically, our tax code has become inundated with complex — and often unfair — initiatives, loopholes, exceptions and incentives.
Recently, leaders from both sides of the political aisle have been exploring simpler and more independent approaches to taxation that would allow citizens to follow their own priorities for investing and spending money. Current debate is stirring a constructive dialogue that could provide a foundation for a new, simplified tax code. This dialogue encourages us to give real consideration to metaphorically pressing the “reset” button on our tax code.
Although Washington is not known for its ability to turn on a dime — particularly when it comes to making comprehensive change in a reasonable timeframe — lawmakers should take seriously the imperative of de-cluttering the current tax code to further jump-start the economy. If such an overhaul could make our tax code fairer, simpler and less prescriptive in terms of how and where people spend their money, we would all be better for it.
Randy Shumway is the CEO of the Cicero Group and is the economic advisor to Zions Bank.
- The best Black Friday deals of 2014
- Can a cash grocery budget save you money?
- Which home improvements give the best ROI?
- 4 reasons why you shouldn't shop on Black Friday
- BLACK FRIDAY LIVE: Protests, beer and prison
- Why Utahns are some of the biggest spenders,...
- 6 steps to better budgeting
- What women can do to prepare for retirement
- Working on Thanksgiving Day? Here's why... 12
- Why Utahns are some of the biggest... 12
- Immigration reform will boost the... 8
- In our opinion: Fear, intentions can... 7
- Thanksgiving trumps Black Friday for deals 4
- What women can do to prepare for... 3
- Why Salt Lake City is one of the best... 2
- 5 ways to talk about money with your... 2