Our current federal tax system simply does not work any longer, for individuals, businesses, or for the interests of long term economic growth. I believe that any effort to reform the tax code should be built around a few relatively simple principles.
First, any changes in the code must protect poor families and the middle class. I fully support the goal of broadening the tax base and lowering rates, but it should go without saying that this process cannot result in an increase in the tax burden for lower and middle-income Americans. Our end goal should be to ensure that tax reform does not result in big tax increases for middle and lower income families, and protects beneficial provisions such as the mortgage interest deduction, the state and local tax deduction, and the earned income tax credit.
Second, tax reform must raise revenue. Our budget deficit is simply too large to be closed through spending cuts alone. Republicans and Democrats, liberals and conservatives, have acknowledged the fact that without revenue as a percentage of Gross Domestic Product eclipsing the 20% mark, we can never fairly balance our budget.
Third, tax reform should simplify the code, and tax incentives that no longer serve the initial intended policy goal should be the first to go. For instance, high oil prices mean that tax breaks for production are totally unnecessary. Similarly, the large gap between rates on capital gains and ordinary income can no longer be justified when capital gains rates are applied equally for investment in both domestic and foreign markets.
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