Today, the House Ways and Means Committee is meeting to discuss reforming the U.S. tax code. Though in its early stages, I believe tax reform can be one of the most promising areas for bipartisan cooperation in this new Congress. Members of both parties can agree that a tax code that unleashes economic productivity, creates middle-class jobs and reduces the deficit would be a major boost to our economic future.
I encourage President Barack Obama to put tax reform at the center of his agenda for this year. And I encourage Democrats and Republicans to listen to such a proposal with open minds.
As we are reminded every spring, our tax code is a monumental collection of rules and regulations, riddled with loopholes and preferences that are a drain on job creation and exacerbate the deficit.
Republican and Democratic administrations both understand the importance of tax reform — which is why commissions under this president and President George W. Bush put forward plans. In a nutshell, reform could make the tax code simpler by closing loopholes in exchange for lower rates and reducing the deficit while spurring job creation and investment in our priorities.
With a simpler tax code, many of the billions of dollars and the more than 225 million collective hours spent on tax preparation each year would be freed for productive activity that drives innovation and job creation. And our middle class as a whole would benefit dramatically.
Many of the tax code’s numerous loopholes, while popular with special interests, hamstring our economy — distorting economic decisions for families and businesses alike. With fewer loopholes, families would be able to make choices that are best for their children’s future — not that get them the biggest tax breaks. Businesses would base more decisions on maximizing their growth, not their write-offs.
It’s important that tax reform has an equal effect on people of all incomes. Some reform plans actually turn out to be regressive: They redistribute wealth up.
But I am confident that leaders in both parties can find a way to work toward a plan that accomplishes what the Bipartisan Policy Center’s recent proposal would do: close loopholes and reduce rates across the board while maintaining progressivity.
Tax reform is an integral part of reducing the deficit and getting our fiscal house in order. I’ve always believed that there’s no way — either politically or substantively — for our nation to get out of debt unless we pay attention to both the spending and revenue sides of the equation.
So as we take a serious look at the spending that really matters — not symbolic cuts but real challenges like entitlements and defense — we also have to find a way to raise revenue.
Even if the federal government were dramatically smaller, we would still be deep in debt. Tax revenues are at a historic low. In fact, revenues collected by the federal government last year are the lowest they have been, as a share of the economy, since 1950.
A massive burden of debt is crippling our children’s future opportunities, making it harder for them to go to college, start a business or buy a house.
Reforming the tax code in a way that produces fairness, simplicity and sufficient revenues is one of the single biggest investments we can make in the economic future of our middle class. A nation sunk in debt is a nation without choices.
There’s no way that we can simplify our tax code and reduce our debt without a bipartisan effort. And these efforts have succeeded in the past. In times of divided government, it takes leaders in both parties to realize that politics isn’t always zero-sum and that the shared benefits we reap as a nation make cooperation essential.
That’s what President Ronald Reagan and Speaker Tip O’Neill realized when they successfully reformed our tax code in 1986. The time is ripe for us to follow in their footsteps.
Rep. Steny Hoyer (D-Md.) is the House minority whip.
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