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3 Steps to Pro-Growth Tax Reform: Fair. Competitive. Simple.

U.S. Congressman Paul Ryan - Serving Wisconsin's 1st District

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3 Steps to Pro-Growth Tax Reform:
Fair. Competitive. Simple.

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By Congressman Paul Ryan

America's economy has been hit really hard. A lot of people have lost their jobs. More borrowing and spending and higher taxes are not going to bring jobs back to America. The last thing we need to be doing is hindering job creation in America with a complicated tax code like the one that we have today.

A tax code should be fair, competitive and simple, and the U.S. tax code fails on all three counts. Here are common-sense ideas we've advanced before; ideas that have bipartisan support.

First, we have to make our tax code fair.

It's full of deductions, credits and special carve-outs – otherwise known as "loopholes" – that let politically-connected companies avoid paying taxes. Every dollar that businesses spend lobbying for a better tax deal, is a dollar they're not spending on making a better product.

And, since every dollar hidden in a loophole doesn't get taxed – politicians make up for this lost revenue by increasing overall tax rates. So we need to close these loopholes.

But if we just close loopholes, then our federal corporate tax rate climbs to 35 percent, which is really high. Add in state and local taxes, the rate climbs to 39.2 percent – the second highest tax rate among developed countries.

On top of sending almost 40 cents out of every dollar earned, straight to the government, businesses pay investment taxes, payroll taxes, and a handful of other taxes our government makes job creators pay.

In the 21st century global economy – and when American families need jobs – this approach just doesn't make any sense.

We need to make our tax code competitive.

The budget we passed in the House of Representatives calls for closing the loopholes and lowering the rates.

The President's bipartisan Fiscal Commission proposed something similar.

Its plan would reduce the corporate tax rate to as low as 26 percent, and to lower the top individual rate that many small businesses pay to as low as 23 percent.

So if we lower tax rates, does that mean the wealthy pay less in taxes? Not if we do it by closing loopholes, because the people who use most of the loopholes are those in the top tax brackets. For all the money that's parked in these tax loopholes, all that money is taxed at zero. Take away the tax loophole; lower everybody's tax rates. That money's now taxed but it's taxed at a fair more simple, more competitive way so the small business men and women who are out there striving and competing have a better tax rate so they can succeed in this global economy.

Third, let's make the tax code simple.

All together, individuals and businesses spend over six billion hours and 160 billion dollars, every year, just trying to understand and comply with the tax code.

Let's simplify the code, not just by closing loopholes, but also by decreasing the number of different tax brackets taxpayers fall in.

Fewer brackets, along with lower individual rates, will make the tax code less complicated, and let more people keep more of the money they earn.

There's a reason this approach has attracted bipartisan support: It's Fair, It's Competitive, and It's Simple.

America's been knocked down before. We've had tough recessions before, and we know that the secret to growing jobs and prosperity in America are through the ingenuity and the hard work of our businesses – of our small businesses, of our large businesses, of job creators. We don't want a tax system that rewards people for coming to Washington and getting special favors. We want a tax system that rewards Americans for hard work, risk taking, entrepreneurship , investment and innovation. These are the kinds of things that have made America great in the past. And these are the kinds of ideas we're going to need if want to grow our economy in the future and compete in the 21st century global economy.

Do you agree with Congressman Ryan?

Would you recommend another proposal? If so what would you propose?

Thanks!

Darla Dawald, National Director

Tags: americans, congress, jobs, oabama, ryan, tax, taxes

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Replies to This Discussion

Permalink Reply by Reginald Carl Jackman on September 16, 2011 at 3:44pm

What is not withheld from you paycheck, what is not collected in corporate taxes, what is not collected with the standard IRS income tax, and what is paid out in pre-bates: all this will be added to your grocery bill. There is no magic to reduce what we will pay. (But a flat tax is better.)

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Permalink Reply by tom dodd on September 16, 2011 at 4:34pm

...LET'S just go with a 10% Sales Tax and do away with all of the other federal taxes... everyone pays, even those off the grid.

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Permalink Reply by Reginald Carl Jackman on September 16, 2011 at 5:09pm

I believe it would be like 35-40%. Money doesn't grow on trees.

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Permalink Reply by tom dodd on September 16, 2011 at 5:39pm

...NOT if we're going to cut the size of government by 50%... THE Fair Tax people have put the figure at 23% to maintain the status quo [with the Pre-Bate]. THUS, 10% sounds reasonable to me...

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Permalink Reply by Ursula Anne Baxter on September 17, 2011 at 1:03pm

Reginald, Please read all my various replies on this post to see what is being proposed. With Patriot Love, Ursula

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Permalink Reply by Reginald Carl Jackman on September 17, 2011 at 7:29pm

Hi Ursula, with great respect, I have probably already read most everything you have posted. (I think I sent you a friend request. We can talk more offline if you'd like.)

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Permalink Reply by Ursula Anne Baxter on September 17, 2011 at 10:56pm

OK. I would like that. With Patriot Love. Ursula

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Permalink Reply by John Stauffer on September 17, 2011 at 3:48pm

Reginald, how can any of these be added to your grocery bill. Bussinesses are not taxed so why would your grocery bill be increased. In fact with the Fairtax your grocery bill will go down because the owner will not have to pay income tax on the bussiness, pay payroll taxes on employees and himself, pay all the embedded taxes on all the commodities he buys to sell in the store.

The flat tax still taxes income. Alot of people do not have income or they do not claim it. 47% of people who do have an income and report it do not pay any income tax. The Fairtax taxes consumtion (wealth) when you buy new goods or services. Everybody becomes a tax payer with the Fairtax.

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Permalink Reply by Reginald Carl Jackman on September 17, 2011 at 7:18pm

Indeed, it is because (1) businesses are not taxed, (2) owners do not pay income taxes, (3) payroll taxes are not collected, and (4) there are no embedded taxes, it is because of all this that the government will fall short of its needed income unless it raises that income with the consumer tax. Additionally, the government must collect even more to have the money to pay out in pre-bates.

With a flat tax, no one is taxed unless they have an income. And everyone pays in proportion to their income. So everyone would be paying their fair share. [The Transitional Flat Tax provides an extra deduction for those with low incomes. It serves the same purpose as a pre-bate. Filing is optional.]

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Permalink Reply by John Stauffer on September 18, 2011 at 12:40pm

I,m sorry but you need to read the Fairtax book or go on the web site (fairtax.org) and find out what the Fairtax is all about. The Fairtax is a consumption (sales) tax on all New goods and services. It is revenue nuetral, meaning that it will bring in as much as the current income tax does. The Fairtax has nothing to do with spending (that is an argument for another day) it is concerned with revenue.

The Fairtax is the most reseached tax plan we have ever had. 22 million dollars of private money was used for focus groups across the country to see what the people thought about the current tax code and what they thought would be a better way of collecting taxes. That information was given to 7 top university's economic departments across the country and asked to come up with a better way to collect taxes.

"With a flat tax, no one is taxed unless they have an income." With this statement you made, shows that you don't understand the problem. The very rich do not have income, theives and crocks don't have reported income, illegals do not have reported income, the underground economy doesn't have reported income, people who work for cash don't report it all.

How about leaving people earn as much money as they can and not pay any tax until they spend it on new goods and services. We then decide how much we will pay in taxes depending on our spending rather the government telling us how much to pay. Everybody's situation is different so why should we all pay the same rate?

With the Fairtax we have over 300 milliontax payers instead of the few income earners who declar there earnings.

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Permalink Reply by Reginald Carl Jackman on September 18, 2011 at 5:40pm

John, I respect your sincerity in supporting the so-called Fair Tax. We all want a fair tax. Early on I thought that a flat rate consumer tax would be good. But then I looked at the particulars of the Fair Tax bill and found it was something entirely different.

Both simple flat and fair taxes suffer from a key problem: they are fair and balanced, but our current system is progressive. Thus there is a tremendous lobby against their adoption. Actually the economy would adjust, but that's something not yet generally understood. The Transitional Flat Tax employs a ramp to deal with this problem. The Flat Tax employs its pre-bate system. To me the pre-bate is absolutely horrendous; we'd all become subservient to government because of the monthly doles.

I'd also like to get rid of the IRS and the never-ending government dickering over the tax code. With the Flat Rate, once you set the rate, it's done. But with the Fair Tax, there will forever be adjustments to determine what is to be taxed and what not. And with a high consumer tax, many people would be driven to buy under-the-table or out of state; it just doesn't sound good.

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Permalink Reply by John Stauffer on September 18, 2011 at 7:49pm

The current system is not progessive. The payroll tax (medicare and social security) is paid on the first dollar you earn and is the most regessive tax there is. I'm pretty sure that stays in place with the flat tax On the other hand the Fairtax eliminates the payroll tax.

The Fairtax is just like the flat tax in that they both have one rate. Congress can change the rate any time they want. With the Fairtax there is a requirement that they must have a 2/3's vote inorder to raise the rate. The Fairtax prohibits any exemptions, deductions, or loopholes. Yes Congress could change that but We The People are watching them and after the last election they know we will vote them out of office.

I do not know why you would say "With the Flat Rate, once you set the rate, it's done"

Congress could change the rate anytime they want. The IRS is still in place and you are still taxing income. Why tax those who contribute to the economy, let them make as much money as they can without taxing them. Tax those who take away from the economy (consumers). Everybody becomes a tax payer.