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1 Scott A. Hodge, Hearing on Tax Reform and Tax Provisions Affecting State and Local Governments before the House Ways and Means Committee 1 (2013)

handle is hein.taxfoundation/taxfaaaf0001 and id is 1 raw text is: Written Testimony of Scott A. Hodge, President, Tax Foundation Hearing on Tax Reform and Tax Provisions Affecting State and Local Governments Before the U.S. House of Representatives Committee on Ways and Means March 19, 2013 Mr. Chairman, Mr. Ranking Member, and members of the Committee: Thank you for the opportunity to speak to you today on the issues related to tax reform and the tax provisions affecting state and local governments. Founded in 1937, the Tax Foundation is the nation's oldest organization dedicated to promoting economically sound tax policy at the federal, state, and local levels of government. We are a non- partisan 501(c) (3) organization. For 75 years, the Tax Foundation's research has been guided by Adam Smith's immutable principles of tax policy which say that taxes should be neutral to economic decision making, they should be simple, transparent, stable, and they should promote economic growth. In other words, the ideal tax system should do only one thing-raise a sufficient amount of revenues to fund government activities with the least amount of harm to the economy. By all accounts, the U.S. tax code is far from that ideal. Our current tax system is a Byzantine monstrosity that spans 70,000 pages, costs taxpayers more than $160 billion per year to comply with, and is undermining our nation's economic potential. Contributing to this complexity are the more than 170 different tax expenditure programs in the tax code, which have a total budgetary cost exceeding $1 trillion. These myriad tax provisions were enacted to achieve all manner of social and economic objectives, such as encouraging people to buy hybrid vehicles, turn corn into gasoline, buy a home, replace the home's windows, adopt children, put them in daycare, then help them go to college, and the list goes on. Contrary to conventional wisdom, not every tax expenditure is a loophole. However, there are dozens of tax provisions that produce harmful side effects that outweigh whatever public policy reason motivated their creation. These are the most obvious kind of tax breaks the Committee should target for elimination as you look to simplify the tax code while lowering tax rates.

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