Tax reform is always one of the main topics for any aspiring politician. Why is it so important? Let’s begin with some basics.
What is tax reform? Tax reform is a change in the current tax code. Tax reform doesn’t only mean a change in the way taxes are collected by the government, but also the amounts of taxes that are collected. Another important aspect of tax reform includes changes in the way taxes are managed and distributed after they have been collected.
One of the main goals of tax reform is to improve and strengthen the current tax administration system. These revisions ideally should improve social and economic benefits for the citizens paying those taxes.
As we progress in every aspect of our lives and experience social and economic growth, so should tax rules and regulations. Tax reforms should not be cardinal and extreme, because they should never be that poorly executed in the first place. Instead of being the primary agenda for a government every 30 years, tax system fine-tuning should be a regular duty of each government. Tax laws should be reviewed if not yearly then at least every 3-5 years. The more frequently it is done, the quicker everyone can reap the benefits of reform.
What are the key benefits of tax reform?
The taxation system is currently so complex that hardly anyone understands it. Even an average worker bee has to pay $300-400 to get their annual taxes done in fear of making a costly mistake. Simplification of the current tax code would provide an opportunity for everyone to file their own taxes and saving a few hundred dollars annually.
- Economic growth
US corporate tax rates remain one of the highest taxes in the world. At the same time, corporate tax revenue as a share of GDP keeps declining. The government relies less and less on corporate tax revenue. Tax reform could help balance out the gap between what corporations are expected to pay and what they actually pay. The revenue from fair taxes pays for the infrastructure that drives further economic growth.
Certain business structures pay little to no taxes under the current code. Income paid to business owners as a “distribution” receives lower taxation. Multiple deductions and write-offs are a way to pay lower taxes. Lowering the statutory tax rate for businesses but closing off some of the loopholes for deductions at the same time would provide a more effective return of revenue.
- More effective IRS
The current IRS structure is full of bureaucracy and is generally ineffective. It does not have enough resources to efficiently collect revenue. Tax reform would allocate more resources to create a better and more efficient IRS system.
- Bridging the wealth gap
The current tax system only benefits the wealthy. It helps the rich to get richer and poor to stay poor. Tax reform will improve social mobility and help change current socio-economics.
To learn more about the benefits of tax reform go to https://juliogonzalez.com