U.S. Comptroller to Congress: ?If in doubt, leave the preference out?

September 21, 2006

Yesterday, the Senate Finance Committee held a hearing on business tax reform with witnesses from government, academia, and the private sector testifying on how the complexities and distortions of the tax code harm economic growth.

Much of the hearing centered on the issue of whether or not the government should be picking winners and losers in the marketplace by having tax preferences for some at the expense of higher rates for others. GAO Comptroller David M. Walker gave the senators his take:

I think it is very, very important that Congress start to analyze these tax preferences, which ones are working, which ones aren’t, what are we getting a return on investment for, in what form, (and) who is benefiting from that. Then I would specifically suggest that you want to minimize the rate and broaden the base, and that means if in doubt, leave the preference out.

Also, former IRS Commissioner Charles Rossotti testified, and cited a statistic showing how unstable the federal tax code has been since the last major reform in 1986:

Since the adoption of 1986 tax reform, Congress has passed 14,400 amendments to code. That’s an average of 2.9 changes for every single working day in the year for years.

When you add in the 300 billion dollars per year in taxes that should be paid but are part because of the complexity of the Code, you arrive at an overhead burden on honest taxpayers of around 450 billion dollars per year. That’s about what we spend on social security and more than one third of what we actually pay in income taxes.

To view an archived video of the hearing, here is the video link courtesy of the Senate Finance Committee webpage. There is also the webpage for the hearing itself here, which includes testimony from the witnesses and the opening statements from certain committee members.


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