Washington, DC – Chairman Dave Camp (R-MI) today convened the Committee on Ways and Means for its first hearing of the 112th Congress on Fundamental Tax Reform. In response to the hearing, Camp said:
“The witnesses repeatedly hit on two important themes. First, the tax code is onerous and burdensome because it is too complex, too costly and requires too much time to be spent on compliance. Second, with near unanimity, the witnesses agreed that the best way to deal with these challenges is reform of both the corporate and individual income tax system. It was made clear today that broad-based tax reform is critical to transforming today’s anemic economy from one that inhibits job growth, to one that will create an economic climate that will allow for private sector job creation so employers and families can thrive.”
The hearing examined the economic and administrative burdens imposed by the current structure of the Federal income tax system. Below are statements from some of today’s witnesses on the U.S. tax code.
U.S. Tax Code is Too Complex
Speaking on the increasing complexity of the tax code and the confusion it creates, Nina Olson, the National Taxpayer Advocate, commented in her testimony, “The complexity of the tax code and the confusion and distrust it engenders is the #1 most serious problem facing taxpayers – and the IRS.” She added during the hearing that broad-based tax reform was necessary to assure that the tax code’s burdens on both small and large businesses are addressed.
Kevin Hassett, economist at the American Enterprise Institute (AEI), reinforced the call for simplicity in his testimony stating, “Nobody I know thinks the marginal tax rate schedule should look like a city skyline, but that is what we have. This is logically indefensible and a national embarrassment. Through comprehensive tax reform, the system could be streamlined to improve taxpayers understanding (helping them make rational choices) and remove distortions that hamstring economic growth.”
High Tax Rates are Putting U.S. Companies at an Economic Disadvantage
Robert McDonald, Chairman of the Board, President and Chief Executive Officer, The Procter & Gamble Company, appearing in his capacity as Chairman, Fiscal Policy Initiative of the Business Roundtable testified, “The tilted playing field created by the U.S. tax system hurts the competitiveness of American companies in the world’s markets both at home and abroad.” Reiterating the positive effect that lowering the corporate rate can have on the economy he added, “A high U.S. corporate tax rate on domestic profits discourages investment here in America by both U.S.-based companies and foreign-based companies. The highest price paid for the uncompetitive U.S. corporate tax system is paid by the American worker.” He also reminded the Committee that reform of the individual income tax is important too, saying, “Our suppliers are small and mid-size companies.”
High Individual Rates are Hurting Small Businesses
Warren Hudak, a small business owner and President of Hudak and Company, echoed McDonald’s call for individual rate reform. An accountant specializing in tax preparation for small businesses, he observed, “There is certainly an argument to be made that the corporate tax rate is too high, especially relative to the rest of the world.” He added, “But it is necessary to recognize the important role played by small business.” With 75 percent of small businesses structured as pass through entities and paying their taxes at the individual rate, Hudak concluded, “That is why keeping in mind the importance of the individual rates that most small businesses pay should be a part of any debate about tax reform.”