April 27, 2005

TAX REFORM PART TWO: HOW IT AFFECTS YOU

Guest opinion submitted by Idaho Senator Mike Crapo

Many Idahoans can relax now that April 15 has come and gone. Another season of complicated forms and confusing instructions is behind us (for another nine months, at least). Taxes arenâ??t the most exciting topic of conversation, but they affect us in a fundamental way. The Presidentâ??s newly-formed Advisory Panel on Federal Tax Reform has finished its first phase of examination of the existing tax system. The panel held public meetings in seven major cities across the United States over the past three months and solicited public comments at its website, www.taxreformpanel.gov. My position on the Senate Finance Committee allows me to review solutions recommended by the panelâ??solutions to many problems that plague our system.The panel has articulated what we already suspected: Weâ??ve come a long way from the original purpose of federal taxes which is to fund the operations of government. Funding should be shouldered by all in a fair, simple and broad-based manner. Currently, the sheer complexity of the tax code costs Americans $1,000 per family annually when tax preparations costs are averaged out. (Money magazine asked 50 tax professionals to calculate a theoretical familyâ??s taxes. Fifty different calculations for the tax bill resulted, ranging from $12,500 to $35,000. The correct tax, according to the accountant who â??createdâ?? the family, was $23,000.) Families have access to 15 common tax benefits. These have 14 different provisions to reduce benefits above specified income levels that, in turn, contain nine different income definitions. Another provision, the Alternative Minimum Tax (AMT) was created to prevent high income individuals from utilizing tax loopholes to avoid taxes. It was never indexed for inflation and when the temporary income adjustment expires at the end of this year, the number of AMT taxpayers will increase 800 percent. This means that the 6,000 Idaho filers subject to the AMT in 2003 could reach 50,000 in 2006. Under current law, married taxpayers filing jointly with two children whose combined income exceeds $67,000 will be subject to AMT next year, regardless of whether they itemize or take the standard deduction. It isnâ??t breaking news to individuals and business owners that this complexity and uncertainty adversely affects investment and resource allocation decisions, inhibiting overall economic growth. Prioritizing and trimming tax laws is complex, but the bottom line is this: taxes are money that hard-working Americans pay to fund projects that support the public good. As such, the burden should fall to everyone in an equitable manner. Common investment in the public good dictates that the way a fair tax is determined should be straight-forward enough for the average taxpayer to understand. Predictability and stability in the tax code will promote savings and investment and grow our economy, benefiting everyone. Our income is our property and government must protect our right to do with it what we choose. James Madison said as much in 1792, and the last time I checked, the Constitution under which authority he was speaking is the same one we have today.â??A just security to property is not afforded by that government, under which unequal taxes oppress one species of property and reward another species: where arbitrary taxes invade the domestic sanctuaries of the rich, and excessive taxes grind the faces of the poor; where the keenness and competitions of want are deemed an insufficient spur to labor, and taxes are again applied, by an unfeeling policy, as another spur; in violation of that sacred property, which Heavenâ?¦ kindly reserved to him, in the small repose that could be spared from the supply of his necessities.â??WORD COUNT: 592