Every year, families and small businesses begin tax season trudging through last year’s receipts attempting to compile all the necessary documentation required to fill out their taxes. All told, Americans spend about 6.1 billion hours a year trying to comply with the tax code. Given that reality, it is no wonder that more than 90 percent of us either pay someone else to do our taxes for us, or purchase commercial software to help us do it ourselves.
The current tax code is a nightmare. It’s too complex, too costly and riddled with too many loopholes. Clearly, we need to close loopholes and fix the tax code. It should be simpler and fairer for families and it should help create more jobs and higher paychecks.
In addition to its overwhelming complexity, the tax code picks winners and losers while punishing small businesses and hard-working families, who now face tax rates of over 44 percent. You shouldn’t need an army of lawyers and accountants to understand our tax code and the federal government should not be taking nearly half of your money, especially not on top of all the other taxes you pay. We can achieve a simpler, fairer and flatter tax code for Michigan families by enacting comprehensive tax reform.
Families won’t just benefit at home, a simpler tax code also means a stronger economy, more innovation, more jobs and higher paychecks. Independent economists estimate that, when coupled with reduced federal spending, comprehensive tax reform could lead to the creation of one million jobs in the first year alone. And, just this week, I received a new report from 20 economists stating that comprehensive tax reform will lead to pay raises for American workers.
These are big goals but I believe a tax code that is accountable to hardworking taxpayers is necessary and obtainable. As the chairman of the Ways and Means Committee, which has authority over tax laws, I’ve held more than 20 hearings — including joint hearings with my Democrat counterpart in the Senate, Max Baucus of Montana. These types of meetings haven’t happened in Washington for more than 70 years.
My most recent effort to make the tax code work for all Americans is an overhaul of how Washington sets the tax rules for Wall Street — getting rid of loopholes and complex rules that can be exploited by Wall Street. While the tax code was not the driver of the 2008 financial crisis, tax rules certainly played a part. For far too long, Congress has been trying to play whack-a-mole with Wall Street. Every time a new financial product pops up, we try to hit it with more rules. This has lead to a situation where two financial products can have virtually that same economic benefit, but be treated very differently for tax purposes.
The need to address this problem was explained in testimony before the Ways and Means Committee during a December 2011 hearing. One witness, David Miller, described how the use of financial products like variable prepaid forward contracts have resulted in some, including Estee Lauder heir, Ron Lauder, “enter[ing] into a variable prepaid forward contract on his Estée Lauder shares and receiv[ing] over $72 million in cash tax-free. These are not transactions available to working-class Americans, but our realization-based tax system permits them.”
Enough is enough. The time has come for Wall Street to play by one clear set of rules, and, more importantly, for Americans to know that Wall Street is playing by those rules.
This is just the one of many steps along the path to comprehensive tax reform. However, I am confident that with your input, Americans can benefit from the job creation that can come from a simpler, fairer tax code.
U.S. Rep. Dave Camp, R-Midland, represents the Fourth Congressional District.