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1 J. D. Foster, The Contract with America and Tax Reform 1 (1995)

handle is hein.taxfoundation/taxfaaxc0001 and id is 1 raw text is: TAX'%
January 1995

The Contract with America and Tax Reform
House Ways & Means Committee Testimony

ByjD. Foster               The following testimony was presented
Executive Director and  by Dr. Foster before the House Ways & Means
Chief Economist         Committee on January 11, 1995.
Tax Foundation
Mr. Chairman and Members of the Com-
mittee, my name is J.D. Foster and I am the Ex-
ecutive Director and Chief Economist of the
Tax Foundation. It is an honor for me to ap-
pear before your committee today on behalf of
the Tax Foundation to discuss the Contract
with America and the direction of tax policy.
The Tax Foundation is a non-profit, non-
partisan research and public education organi-
zation that has been monitoring fiscal policy at
all levels of government since 1937. We have
approximately 600 members, consisting of
large and small corporate and non-corporate
businesses, charitable foundations, and individ-
uals. Our business membership covers practi-
cally every region of the country and every in-
dustry category.
In the recent election, the American people,
as interpreted by the press and this
Congress, expressed a clear preference for
lower taxes and less government.
I would like to emphasize to the Commit-
tee that the Tax Foundation is not a grass-
roots organization, a trade association, or a
lobbying organization. We do not take posi-
tions on specific legislation or legislative pro-
posals. Our goal is to explain as precisely and
clearly as we can the current state of fiscal pol-
icy and the consequences of particular legisla-
tion in the light of the tax principles delineat-
ed before, so that you, the policy makers, may

make informed decisions.
When it was established in the late 1930s,
the Tax Foundation's founding fathers set out
certain principles of taxation which the Tax
Foundation would promote and which would
guide our analysis of tax proposals. According
to these principles, a good tax system should:
*  Be as simple as possible - complexity
makes accurate tax compliance needlessly ex-
pensive and diminishes the public's willing-
ness to comply with the law;
*  Not be retroactive - taxpayers must have
confidence in the law as it exists entering into
a transaction;
*  Raise revenue, not micromanage the econ-
omy with subsidies and penalties;
*  Not be continually rewritten - frequent
change lessens citizen understanding of the tax
code and complicates long-term economic
planning; and,
*  Be implemented recognizing the competi-
tive nature of the world economy.
In the recent election the American peo-
ple, as interpreted by the press and this Con-
gress, expressed a clear preference for lower
taxes and less government. One does not have
to look far to find an explanation. Every year
the Tax Foundation produces an analysis we
call Tax Freedom Day. Imagine every dollar
you earn going to pay federal, state, and local
taxes beginning January 1. Tax Freedom Day
is the day when the average taxpayer's tax bill
is paid off for the year, when the taxpayer is
free to keep the money he or she earns.

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