Show me a good tax law and I’ll show you a vibrant country that is productive, resilient and full of opportunity.
There are a couple of primary reasons for this.
First, people tend to have as their most important concern their own well-being. Besides providing food and healthcare and protecting oneself and family from harm, right up near the top of the list is making enough money to afford all the things on the list.
This is to not say that people, especially Americans, are selfish. They are not. We are the most giving and altruistic culture in the world. But it is difficult to be generous if you have not cared for yourself and your family first. Thus, having a good job that produces a decent income becomes uniquely important for most Americans.
Not having that income subject to misguided tax policies is an important part of making people feel more confident about their government, which leads to a stronger, more generous and successful nation.
The second reason a good tax policy leads to a better, more resilient nation is less obvious but no less motivational. All jobs are arguably created either in or by private activity. There are millions of public or quasi-public jobs, of course. But unless someone pays part of their earnings or income to the government, there would be no government jobs.
Someone in a society needs to be productive in the private sector if a government is to function. And productivity is tied to tax policy.
Bad tax policy means less productivity. Good tax policy means more productivity, more jobs, more revenue and, most likely as a result, more government. So everyone should be for a tax policy that encourages private enterprise, even liberals who like more government.
Unfortunately, America’s tax policy is a disaster. It is excessive, convoluted, chaotic, counter-intuitive and a general mess.
Alan Simpson and Erskine Bowles, the co-chairmen of the president’s fiscal reform commission, proposed a workable template. Make the federal tax system simpler, fairer (keeping it progressive) and oriented to capital formation and the promotion of individual entrepreneurship. Reduce the corporate tax rates radically and move to a territorial system so companies will expand here instead of moving overseas and employers from overseas will want to come here.
The primary reason this should be so doable today, besides the fact it is critical to the survival of our nation as a commercial power, is that the various players and two parties have not yet gone to the ramparts on the issue. Both sides can obtain considerable political mileage out of this type of an initiative.
Liberals will get to end a large number of tax breaks that have been squirreled into the code by “powerful special interest groups.” These tax breaks are referred as tax expenditures by the left, who, with a few exceptions, deem them undeserved and an abuse of the political process. Further, liberals keep progressivity.
Conservatives will get a tax code with lower rates that promote the creation of private investment and the expansion of American entrepreneurship. The changes would allow people to invest for the purpose of making money and creating stronger economic activity, rather than avoiding taxes, an extremely wasteful and inefficient way to run a country.
Fiscal policy also wins, as it is safe to assume that simplification will bring greater compliance and that economic activity will increase dramatically, thus generating a great deal more income, reducing annual deficits and slowing the rate of growth of the debt.
Under any logical scenario it appears to be an idea whose time has come for a government whose time is running out. Without a major restructuring of our tax laws, there is no plausible way to get a federal government we can pay for and a society that continues to flourish in a very competitive global economy.
In 1986, the Ways and Means Committee under then-chairman Dan Rostenkowski (D-Ill.), working with Sen. Bill Bradley (D-N.J.) and President Reagan, substantively rewrote the nation’s tax laws, radically reducing tax rates and simplifying the tax code.
It is time to revisit this effort, and with Rep. Dave Camp (R-Mich.) as chairman of the Ways and Means Committee you have the type of talented, substantive leader needed to accomplish it.
Let us return to the days of yesteryear and ride to cause of a prosperous and competitive nation with a fairer and simpler tax law that is of the Congress, by the administration and for the people.
Judd Gregg is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee and also as ranking member of the Senate Appropriations Foreign Operations Subcommittee.