Newly minted Ways & Means Committee Chairman Dave Camp (R-MI) showed remarkable leadership this week when he announced that one of the first action items for the powerful Committee will be hearings on fundamental tax reform. While an overhaul of the tax code will not happen overnight, it is a topic ripe for bipartisan compromise, and there is no better time to start than now. This year marks the 25th anniversary of the enactment of the Tax Reform Act of 1986, a gold standard of across-the-aisle collaboration, and we hope that the members of the 112th Congress will follow suit.
We cannot address our nation’s debt without reforming the 70,390-page U.S. tax code, which is fraught with inefficiencies that hamper our competitiveness and growth. The complex maze of innumerable deductions, brackets, and rates is a poor instrument for raising revenue. Worse still, the code is unfair to taxpayers, who largely are forced to rely on paid professionals or expensive software to navigate the system. Even with this help, Americans still spend 3 billion hours of their own time on tax matters. This symbol of bureaucracy run amok is a ready target for an American public that is hungry for a streamlined, smaller government.
With Japan’s recent move (lowering their corporate tax rate by 5 percentage points), the United States has the dubious distinction of having the highest corporate tax rate of any country in the Organization for Economic Cooperation and Development (OECD). This unfortunate honor encourages employers to locate, invest, and profit elsewhere. Under the status quo, we are making it more difficult for ourselves to compete in a globalized world and recover the 8 million American jobs that have been lost over the past three years. Major tax reform is needed to address these issues and simultaneously raise additional revenues that will be required to put our country back on a sustainable fiscal track.
Not only is tax reform necessary, but it’s becoming increasingly politically viable. The Administration, the Democratically-led Senate, and the GOP-driven House have all signaled willingness to act. Most recent deficit reduction proposals – including the Bipartisan Policy Center’s Restoring America’s Future plan and the President’s Commission plan – extensively detail bipartisan blueprints for feasible legislation. The economy demands it. The public wants it. In a legislative session that may be otherwise overridden with political gamesmanship and party platforms leading into the 2012 elections, Chairman Camp’s actions will hopefully be the spark that ignites cooperative action on tax reform and puts partisanship in the back seat.
Laura Hatalsky contributed to this post.