2009 Stimulus Check

A report by Jack Kemp’s National Commission on Economic Growth and Tax Reform holds the promise of dramatic improvement in the well-being of all Americans. It provides the needed philosophical underpinning to construct a model tax system for our Nation and, hopefully, marks a milestone in saying farewell to the onerous tax code we’ve all come to know and hate.

The Commission’s work reflects the growing consensus among economists, lawmakers, presidential candidates, and grassroots Americans that our current income tax system has become a tremendous obstacle to economic growth and our standard of living. The current tax code is beyond repair. It is unfair, complex, costly, and punishes hard work and investment. Simply stated, it is unfit to carry us forwards and prevents us from ensuring a better future for ourselves, our children and grandchildren.

Perhaps the most significant aspect of the Commission’s report is its timeliness. Today, as Congress and the Administration are struggling over tax relief as a component of a balanced budget agreement, the Commission’s work implies that those tax cuts are absolutely critical. For decades, genuine tax reform has been hindered by a tax policy preoccupied with raising revenues to feed the federal government’s insatiable appetite for spending. Fortunately, the Republican commitment to balance the budget through spending restraint will focus tax policy on economic growth. The Republican effort to improve savings and investment with capital gains tax relief, expanded savings incentives, and family tax relief would be a down payment on the pro-growth policies articulated in the Kemp Commission’s findings.

The current tax system depresses the performance of our economy. It combines steep tax rates and punitive taxation of savings and investment with a multitude of loopholes, subsidies, credits and exemptions that can be used only by a limited number of taxpayers. Because of these high tax rates and selective deductions, investment decisions are all too often based on tax consequences instead of economic merit.

In part, this is why our economy has slowed from an average growth rate of 4 percent per year in the middle of the last century to around 2.5 percent since the 1970s. This slowdown costs every person in America more than $10,000 a year! Tax reform guided by the Commission’s principles would help reverse this growth gap and translate into a higher living standard for all Americans.

A very important axiom outlined in the Commission’s report is the importance of “neutrality” in a tax system. In other words, the tax code should not attempt to micro-manage individual behavior or the economy. Unfortunately, since its 1913 enactment, our income tax system has fallen prey to a multitude of unintended purposes including income redistribution, social engineering, and government intrusion into our saving, investing, and spending decisions.

Our complex and intrusive income tax system allows government to engineer behavior, jeopardizing not only economic growth, but individual liberty and the freedom of Americans to decide how best to use their own money. Currently, the federal government takes a huge chunk of people’s income and then induces them to act in particular ways by giving them some of their own money back through deductions and credits.

As a democracy, we have the right to demand that our tax system work for us, not against us. The Kemp Commission’s findings and recommendations provide the foundation to build a new tax system that will be equitable and will promote, not punish, economic growth. A low-rate flat tax would accomplish those goals admirably by allowing all taxpayers to keep more of their own money as they earn it and not interfering with our free economic choices.

Mere tinkering with the tax code will not correct the enormous problems ingrained in our current tax system. By embracing the ideas presented by Jack Kemp’s Tax Reform and Economic Growth Commission, we’ll be well on our way to constructing a new, model tax system that will improve the lives of all Americans.