- The Washington Times - Thursday, November 3, 2005

Nobody likes paying taxes — but it’s not just paying taxes that hurts. It’s figuring what you owe. Instead of making it as easy as possible, our tax code is an obstacle for those who want to pay their fair share.

There are more than 1 million words in our tax code and the number of pages has doubled over the last 20 years. In 1940, it took only two pages of instructions to explain how to fill out the regular Form 1040; today, there are 36 pages of instructions accompanying the 1040 EZ or “short” form, and it takes the average taxpayer 11 hours to complete it. All in all, Americans spend close to $140 billion each year just to comply with their tax obligations.

President Bush has recognized the need to change our tax system. Earlier this year, he created a bipartisan Advisory Panel on Federal Tax Reform and appointed the two of us — along with seven other distinguished citizens of both political parties — to lead the effort. Our mandate was to propose options to make the tax code simpler, fairer and more conducive to economic growth.

Our current tax code is a complex and cluttered mess that discourages economic growth. It penalizes hard work, discourages saving and investment and hinders the competitiveness of American businesses in our global economy. This week, we delivered to Treasury Secretary John Snow two recommendations, the “Simplified Income Tax Plan” and the “Growth and Investment Tax Plan.” These proposals are an excellent starting point for the tax reform debate.

Both plans eliminate the Alternative Minimum Tax, which is scheduled to raise taxes on more than 21 million Americans in 2006 and 52 million taxpayers in the next 10 years. The plans close loopholes and eliminate special tax breaks that allow the well-advised to avoid paying their fair share.

And they make the tax code fairer in other ways. Currently, 65 percent of Americans don’t itemize, and therefore miss out on tax benefits for which they could be eligible. They simplify and extend to all Americans important tax benefits that encourage home ownership and charitable giving. They make it easier for Americans to purchase health insurance when their employers don’t offer it. The panel’s plans remove this barrier. They shift some tax preferences from deductions, which tend to benefit high-income households, to tax credits, which benefit all taxpayers equally.

The plans make it easier for everyone to save. They would create three simple and streamlined savings accounts so that families can put more aside for their health, college education, retirement and other long-term needs, without resorting to the alphabet soup of saving vehicles (401(k), 403(b)s, Roth IRAs) that currently exist. They would also create a saver’s credit to help low-income families save.

Another major accomplishment of the panel was to lower the top marginal income tax rate on individuals and businesses, which should encourage economic growth and stimulate investment. The Simplified Income Tax reduces the top rate from 35 percent to 33 percent for individuals and 31.5 percent for businesses. The Growth and Investment Tax Plan cuts the top rate to 30 percent for both individuals and businesses.

While both plans simplify filing and reduce complexities for businesses, they differ in the taxation of business and investment income. For many small and large businesses, the tax code’s complexity is a deterrent to job creation and growth. With a simpler system, America’s companies should have an easier time competing both in America and around the world.

We hope that the Bush administration, Congress, the business community and all Americans work together to reach the common goal of reforming and simplifying our outdated and overly complex system. It’s not an easy task, but taxpayers deserve a tax code that is fair, simple to understand and allows them to grow and flourish.

Former Republican Sen. Connie Mack is the chairman of the President’s Advisory Panel on Federal Tax Reform. Former Democratic Sen. John Breaux is the vice chairman of the panel.

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