HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.
![handle is hein.taxfoundation/taxfaalc0001 and id is 1 raw text is: TAX w
FOUNDATION
April 2000
International Aspects of Tax Reform
Testimony Before the House Ways and Means Committee
ByJD. Foster, Ph.D. Mr. Chairman, thanks you for this opportu-
Executive Director and nity to testify before the Committee. My name
Chief Economist
Tax Foundation is J.D. Foster and I am the Executive Director
and Chief Economist of the Tax Foundation.
The Tax Foundation is a non-partisan, non-
profit research and education institution. It
was established 63 years ago to provide the
American people and policy makers with rel-
evant, timely, and accurate information and
analysis on fiscal policy matters at the federal,
state, and local levels.
The sustained interest in tax reform should
come as no surprise. More than any other as-
The income tax is like an old machine tilling
the fields of the economy, reaping a harvest
of revenue for the federal government....
[With] ever greater demands on the tax
machine, another major overhaul is past
due.
pect of government the federal income tax
directly and repeatedly influences Americans'
lives. We may be most aware of this now dur-
ing the tax season, but every week our lives are
touched and our decisions colored by the in-
come tax: How much should I save in my
401(k)? Should I sell some stock and pay the
capital gains tax to buy the stock I would pre-
fer? Should I go to college, to graduate school
or night school to get a better job and earn a
higher salary if it means a much higher tax rate?
Should I take out a home equity loan to buy a
car? Should I buy a home or rent? If I rent and
lose the home mortgage interest deduction, can
I afford to make as big a charitable contribution
to my church, synagogue, or mosque?
The income tax is like an old machine
tilling the fields of the economy, reaping a
harvest of revenue for the federal government.
Fourteen years ago the Congress performed a
major overhaul through the Tax Reform Act of
1986. In the intervening years the Congress
has passed hundreds of changes in the nature
of ongoing maintenance. But it has also
passed scores of changes asking the old ma-
chine to do even more: To supplement welfare
spending, to encourage saving for education,
and so on. Meanwhile the fields have changed
steadily as has the pressure to produce, put-
ting ever greater demands on the tax machine.
Even under ordinary circumstances, another
major overhaul would be past due today.
Circumstances are far from ordinary, how-
ever. The growing breadth of the economy
combined with the rapid escalation of comput-
ing power have spawned a degree of complex-
ity in the tax code affecting both individuals
and businesses that was unthinkable not long
ago. This complexity has led to a growing
animus and distrust of the tax system, the
Internal Revenue Service, and the federal gov-
ernment in general.
It is unwise to impose upon citizens any
system that is torturously complex and affects
so many areas of their lives. This complexity
of the code leads to a sense of imbalance and
unfairness. Some instances are obvious, like
the marriage penalty which the Congress is
seeking to address this year. Others are a mat-
ter of perception. We come to believe our
neighbor knows of some twist to the tax code
that allows him to pay less tax than we do.
13luElp](ViewImageLocal?handle=hein.taxfoundation/taxfaalc0001&div=1&collection=&method=preview&ext=.png&size=3)