Background: Our current tax code is 20 years outdated and in desperate need of reform for a number of very important reasons. First, our tax code is far too complex for the average citizen. In 1913, the tax code was a reasonable 400 pages long, but by 2013 it grew to almost 74,000 pages. Americans spend 6 billion hours complying with the tax code every year while estimates show tax code compliance costs our economy $125 billion to $400 billion annually in foregone economic growth. The complexity of the tax code allows individuals and businesses with the best lawyers and accountants to pay the least amount of taxes possible.
Second, our tax rates are too high on individuals, families, and businesses. On the individual side, top income earners experience a top tax rate of 39.6%. On the corporate side, American businesses experience a combined marginal federal and state tax rate of 39% – one of the highest in the industrialized world. In addition, the U.S. is one of a few countries that does not have a territorial tax system, which protects foreign profits earned by domestic companies from double taxation. As a result, the federal government estimates over $2.1 trillion in profit is currently held overseas by American companies.
Third, our tax system is both discriminatory and anti-growth. Discriminatory because tax credits, deductions, and exemptions reward certain individuals and businesses at the expense of others. Anti-growth because income that is saved or invested is both taxed once through income taxes and then receives a second tax through the corporate, estate, and capital gains tax. This form of double taxation discourages saving and investment essential for economic growth.
Solutions: Congress must take steps to enact comprehensive tax reform that simplifies the tax code, lowers all tax rates, eliminates the bias against saving and investment, and eliminates tax preferences that pick winners and losers. These first steps should include enacting a flat tax, repealing the estate tax, repealing double taxation – particularly on investment earnings, and moving from a worldwide to a territorial corporate tax system.
This kind of fair, pro-growth tax reform will strengthen and expand our economy, encourage job growth, and allow more families to achieve the American dream. Comprehensive tax reform has the potential to grow the economy by 15 percent over the next 10 years, increasing the average American family’s wages by 10 percent, or $5,000 for a family earning $50,000 a year.
American realtors stand to benefit immensely. A stable and growing economy spurred on by tax reform means more businesses will invest in both commercial and industrial real estate. It means more families can save and invest so they can afford to buy a house. It means individuals and businesses will be rewarded on their merit, rather than their political connections or talented lawyers and accountants.