President Trump to tackle broken tax system
President Donald J. Trump is working to reform the tax system so that Americans are treated fairly and can keep more of their hard-earned money, and companies can bring jobs back to the United States.
According to a news release from the administration, Trump will jumpstart America’s economic engine by making it the most desirable country in the world for businesses to invest and grow. By lowering taxes, he will help boost take-home pay for all American workers.
Trump will restore fairness to the tax system by simplifying the tax code and closing special interest loopholes. The tax code has increased so much in length and complexity that hundreds of pages in instructions are necessary to file even the most basic tax returns.
The typical Form 1040, used by most American families, has grown to 79 lines from only 34 lines in 1935, according to the National Taxpayers Union.
The instructions alone for the form has grown to 241 pages from just two pages in 1935. The tax code is over six times as long as it was in 1955, according to the Tax Foundation. A complex and ever changing tax code is unworkable for most Americans, forcing them to spend too much of their time and income on paid professionals and filing aids just to pay their taxes.
Taxpayers spend over 6 billion hours annually complying with the tax code, according to the IRS’s Taxpayer Advocate Service. Just to comply with the tax code puts a $262 billion burden on the economy, according to the National Taxpayers Union. Over half of all tax returns filed in 2017 were prepared by a tax professional, according to the IRS.
• 94 percent of taxpayers paid someone or used software to prepare their returns, according to the National Taxpayers Union.
• 91 percent of small businesses hired a professional to do their taxes, according to the National Federation of Independent Business.
The Form 1040 tax return used by most Americans costs $176 to complete with the average accounting firm, according to the National Society of Accountants.
Small businesses incur between $15 billion and $16 billion on tax compliance costs, according to the National Federation of Independent Business. It is no wonder that, according to IBISWorld, the tax preparation industry earned $10 billion in revenue in 2016.
“Our outdated tax code makes our businesses uncompetitive as other nations provide lower tax rates, and incentivizes American businesses to move their headquarters or offshore jobs,” Trump said.
“The United States now has the highest corporate tax rate among the 35 advanced economies in the Organisation for Economic Co-Operation and Development (OECD). The combined corporate tax rate in the United States is now 39 percent, according to OECD data, compared to an average of 24 percent among OECD member countries. China, the United Kingdom, Germany, Canada, and Australia all have lower corporate tax rates than the United States.”
As rates fell across the developed world from the early 1990s to 2016, the United States’ corporate tax rate increased. The United States’ corporate tax rate is 16.4 percentage points higher than the worldwide average, according to the Tax Foundation.
“Businesses are moving their facilities and jobs out of the country to escape our burdensome tax code,” Trump said. “The money American businesses earn overseas is being kept out of the country to avoid our high corporate tax rate. Since 2014, there has been an increase in inversions as American companies try to avoid the incredible disadvantages of our corporate tax system. Fortune 500 corporations are holding more than $2.6 trillion in profits offshore to avoid $767 billion in Federal taxes, according to the Institute on Taxation and Economic Policy.”
