Washington, D.C.,
Apr 16 -
As taxpayers brace for Tax Day this month, it’s a good time for a discussion of the country’s fiscal outlook. Unfortunately, the news for taxpayers is not encouraging.
Though the tax environment we face around April 15 this year is hardly one that encourages economic growth, businesses and individuals could face even harsher tax treatments next year if Congress fails to implement serious reform.
Raising taxes by roughly $6.5 trillion over the next decade (which will start taking effect unless we take action by the end of this year) will only hamstring our economic recovery. Instead of increasing revenue to pay for out-of-control spending, Congress should be attacking the root of the problem and reducing the size and scope of the federal government. In fact, more than $1.2 trillion in spending cuts are to be made as a condition of the debt deal Congress passed last August. The failure of the debt commission means that an inordinate amount of the cuts will come from defense spending unless we find significant savings elsewhere - something we simply have to do.
Additionally, continuing deficit spending while increasing taxes could lead to another downgrade to the U.S. credit rating. In 2011, Moody’s, Standard and Poor’s, and Fitch – the nation’s top three credit rating agencies – downgraded our credit rating in part because they felt that the federal government lacked the ability to get our debt under control. If Congress walks away from a critical opportunity to right our fiscal course by not only cutting spending but also by implementing serious tax reform, those agencies will most likely slap us with another downgrade. That new lower credit rating will put us on par with countries like Trinidad and Tobago and Kuwait.
For the sake of our credit rating and to give taxpayers and businesses greater long-term economic stability, Congress should implement what our economy really needs – serious tax reform that would result in a permanent reduction in marginal rates for all income earners brought about by removing credits, deductions, loopholes and tax expenditures. A simpler tax code would provide businesses with a clearer picture of their long-term opportunities and perimeters, encouraging greater investment of resources to improve and expand, thus creating jobs, rather than encouraging business to hinge their decisions on government handouts. Permanent reforms like these would unleash a torrent of economic activity and move the economy and unemployment rate in positive directions. America’s corporate tax rate, currently the highest in the world, should immediately be reduced to 25-percent.
The check many of us will write to the federal government on Tax Day reminds us that taxpayers are already giving enough of their paychecks to the federal government and without a change even more will be taken out next year. Kicking the tax reform can further down the road is not an option. Congress needs to reform the tax code and make it more conducive for economic growth.
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