Tax Reform is Needed
By Pat Toomey
April 15th is one of the most dreaded days in the calendar year. Doing one’s taxes has become a laborious chore that wastes times, energy, and money that could be better spent on other productive activities. At 66,000-plus pages, our tax code is a complex maze that makes it nearly impossible for anyone to understand. And over the years, the tax code has only gotten more complex as politicians use it as a tool to reward favored industries and special interests with loopholes and giveaways.
Most Pennsylvanians agree that this labyrinth of a tax system is desperately in need of serious reform.
As a former small business owner who owned several Pennsylvania restaurants, I know from personal experience how our complicated and unfair tax code prevents small businesses from growing and creating new jobs.
We should throw out this monstrosity and replace it with a fairer, simpler, flatter, honest, and transparent system that would lower taxes for everyone who pays taxes. We could generate a huge boost in job creation and business expansion if we reward hard work and risk taking; eliminate politicians’ ability to play favorites; and dramatically lower the outrageous cost of compliance.
Comprehensive reform like this is very difficult because all the special interests and their politician friends always dig in to retain the status quot. That’s why I support a reform that could break the log jam. We should allow taxpayers, both individuals and businesses, to choose between the current system, and a simple, flat tax system that taxes income once at one low rate, and allows a generous exemption for all taxpayers. Those who prefer the current system could use it. But I think most people would prefer the simplicity, fairness, and savings of the alternative flat tax. People choosing the flat tax option could fill out their tax return on a form the size of a postcard in less than five minutes. Small businesses could save a fortune in legal and accounting fees that could instead be invested in growing their businesses and creating jobs.
A new Congress, properly focused on policies that will encourage strong, private-sector economic growth, should put comprehensive tax reform high on the agenda. In the meantime, there are a number of narrower reforms and commonsense policies we should adopt immediately.
First, a bipartisan group of Democrats and Republicans have already rallied around extending the 2001 and 2003 tax cuts, scheduled to expire December 31, 2010, instead of imposing a huge new tax increase on all families and businesses effective January 1, 2011. Most people can agree – regardless of political affiliation – that the last thing we should be doing as our economy struggles to recover is raise taxes. In addition, making the tax cuts permanent would provide much needed certainty to businesses. Democratic senators and economists have agreed with Republicans on the critical principle that we should not be raising taxes in the midst of an economic downturn.
Second, Congress should cut the tax on capital gains to encourage businesses to grow. President Clinton clearly recognized the value of this tax cut when he signed it into law in 1997. President Obama has proposed a small scale version of the same. But our economy does not need a baby-step when it comes to spurring investment; it needs a real jolt.
Third, we need to lower our tax on businesses in order to make the United States competitive with other countries on the global stage. Currently, the U.S. business tax is the second highest tax rate in the developed world. At a whopping 35%, it is significantly higher than that of our major competitors. If you were a business owner trying to decide where to invest and build a new business, why would you choose the U.S. with its relatively high tax on businesses? We need to lower the business tax to a competitive rate of 25% to encourage investment, new businesses start-ups, and job creation in America instead of overseas.
Most importantly, we need to avoid the kind of harmful tax policies being advocated by my opponent, Congressman Joe Sestak, and his Washington colleagues. We need to stop passing legislation with billions of dollars in tax increases, like the massive government-run health care bill Congressman Sestak voted for and the cap-and-trade energy tax Congressman Sestak co-sponsored and voted for. And we need to resist the calls for a European-like VAT tax that some Washington insiders are calling for. These are exactly the kind of policies that will destroy jobs when we need to be creating them.
Over the remainder of this campaign – you will hear about two very different tax policies. I strongly believe that my vision of a less complicated, more efficient, and fairer tax code, devoid of the special interest giveaways, will create thousands of new jobs and will help lead our state and our country down the path of a great and booming recovery.
