August 10, 2015
The need for tax reform is clear. Economic growth has been sluggish for a number of years, workforce participation is down, wages are stagnant, and the U.S. tax code is increasingly out of step with those of our major trading partners.
A number of presidential candidates and members of Congress have presented big ideas to overhaul our outdated tax code. Some policymakers are talking about flat taxes, value-added taxes, cash-flow taxes, or hybrid reform plans.
Many of these plans move toward a simple principle: they tax each dollar of income one time, which makes them neutral between the decision to spend a dollar today or save and invest a dollar to spend tomorrow.
This is important because one of this biggest problems with the current tax code is that a dollar of income can face up to four layers of taxation when all is said and done: 1) it’s taxed when you earn it and pay an income tax; 2) it’s taxed when a business you invest in earns a profit and pays a business income tax; 3) it’s taxed when you realize returns to investment and pay taxes on capital gains and dividends; and 4) it’s taxed when you pass away or give it as a gift through estate and gift taxes.
Read the full article at the Tax Foundation: Six Changes Every Tax Reform Plan Should Include