Tax Reform

TAX REFORM -- (Extensions of Remarks - July 15, 2004)

SPEECH OF HON. STEPHANIE TUBBS JONES OF OHIO IN THE HOUSE OF REPRESENTATIVES
WEDNESDAY, JULY 14, 2004

Mrs. JONES of Ohio. Mr. Speaker, public distrust. That is the main reason why we urgently need fundamental tax reform.

More and more Americans distrust the current tax system because they perceive it as unfair. Are they wrong? No. Lower and middle class Americans bear a disproportionate tax burden. Small businesses bear a great compliance burden. That is unfair.

Does fairness in our tax system matter? Yes, it matters because tax collection depends on voluntary compliance. And in a democracy like ours, people contribute private resources to provide the public goods and services we deem appropriate as a community, including helping those not able fend for themselves.

In America, paying taxes embodies a civic relationship of mutual responsibility, and people's obligation to pay them is as legitimate as any other public duty.

So, I am glad that we are beginning this discussion of comprehensive tax reform-an issue that will only become more important for us in Congress.

Let me offer the following five points to consider as we discuss this important issue:

First, fundamental tax reform is a necessity. The current tax system is complicated, inefficient, and unfair. Its unpopularity is warranted, and that is a problem because that breeds distrust.

The tax code must be simplified in order to eliminate wasted time and money spent on compliance. For example, the average taxpayer with a self-employed status has the greatest compliance burden in terms of tax preparation--59 hours.

Furthermore, the complexity of the tax code is evident by the fact that small businesses overpaid their taxes by $18 billion in 2000 and 2001 because of return errors, according to a GAO report. Small businesses unfairly bear the burden of the tax code's complexity simply because they do not have the financial resources to hire sophisticated tax advisors.

Second, simplification can occur only with fundamental tax reform. This is clear after decades of incrementalism. We know that tax reform cannot be done in a piecemeal fashion. The current tax system is flawed at its root. Hard-working, middle-income class people bear the largest burden in our current tax system.

Third, fundamental tax reform must focus on the tax base. Our tax base is derived from total income. However, this is complicated by the bewildering array of adjustments, deductions, credits, omissions, and mismeasurements. This undermines the fairness of our tax system. Therefore, fundamental tax reform must focus on the issue of the tax base in order to achieve equity, efficiency, simplicity, and accountability.

Fourth, the tax code must encourage entrepreneurship. Small businesses provide our economy's foundation. They need a tax system that frees resources for investment and ensures affordable capital. We must support small businesses, which make up the backbone of our economy.

Fifth, fundamental tax reform is possible. Tax reform is not an easy task. However, the American public demands it. They see our tax system as unfair, and they are right. As it was in the mid-1980s, the time is ripe to begin taking serious steps towards achieving fundamental tax reform. We must listen to our constituents and be up to task to implementing a fair tax system.