Tax code

America’s tax laws are generating more federal revenue than ever before – yet Congress still spends 65 percent more than it collects. Meantime, the complexity of the tax code already serves as a serious deterrent to conducting business in this country.

What’s needed is a simplified tax code that every taxpayer can understand and rely on. Such confidence would facilitate investment and profits, and thus increase tax revenues.

But on Monday, Sen. Max Baucus, the Montana Democrat who chairs the Senate Finance Committee, announced that any tax code reform must now include crippling tax hikes. Interpreting Sen. Baucus’ remarks at the Bipartisan Policy Center, The Associated Press reported, “An overhaul of the nation’s tax code should raise additional revenue to reduce massive budget deficits … the Senate’s top tax-writer said Monday.”

The idea that any tax code overhaul should include tax hikes “underscored the differences between the two parties,” noted The AP.

Republicans have already pushed a budget through the House that would create just two income tax rates, 25 percent and 10 percent, down from the current five rates topping out at 35 percent. The changes would supposedly be kept revenue neutral by eliminating tax breaks and deductions – though Republicans have not specified which ones.

Sen. Baucus said the goals of rewriting tax laws should be to help create jobs, make U.S. companies more competitive and innovative, and encourage more education and opportunity. He’s half right. A simpler, more uniform and predictable tax code would indeed free U.S. firms to be more competitive and innovative, thus creating more jobs and opportunity. But “encouraging education”?

Education is good, but the tax code became the stifling behemoth we have today precisely because Congress tried to use it to “encourage” this, and “discourage” that. Taxes should be simple, transparent, uniform and designed to raise the minimal revenues government needs to perform its constitutional functions.

Lawmakers should check their social agendas at the door.

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