"A simple tax code that embodies fairness, emphasizes productivity, and supports America's families ultimately would re-energize the economy." The President's tax proposals do none of these things.
"In spite of all the White House rhetoric about tax fairness and boosting growth, the revenue proposals contained in President Clinton's recently released budget fall far short of what is needed to reform the tax system in America," declares Daniel Mitchell of the Heritage Foundation. Mitchell argues that the President's proposals "actually would make the tax code more complex and harmful to the economy. They would clutter the already massive tax code with greater levels of social engineering," he contends, "and increase the code's bias against savings and investment."
Mitchell charges that "the President's highly publicized tax cut turns out to be just another tax increase once the various hidden tax increases are taken into account." He notes that "the White House has proposed temporary tax cuts that disappear after the year 2000, and tax increases that will last forever. The combination of these two," he concludes, "will mean a tax hike of more than $20 billion over the next five years."
What's worse, the tax cuts appear to be designed to do the least possible good for the American economy, while the tax hikes seem intended to do the greatest possible harm. "Most of the tax cuts in the White House budget fail to reduce the destructive penalties on productive behavior built into the tax code," Mitchell observes. "The President's tax increases, on the other hand, are imposed largely on savings, investment, and entrepreneurship. The net effect of the President's recommendations, therefore, will be to make America less competitive." Mitchell also predicts "greater levels of government intrusion and the micromanaging of private behavior by bureaucrats in Washington."
Mitchell insists that the American tax system "desperately needs reform. Unfortunately, the White House has missed another opportunity to participate in this process. Even more discouraging," he continues, "the President appears firmly opposed to any fundamental overhaul that will make the tax system fairer and more conducive to growth, and the plan he proposes in his budget includes a grab bag of tax increases and social engineering policies."
Mitchell thinks a flat tax is the perfect mechanism for "fundamental overhaul" of our current tax system. A flat tax, he explains, would reduce "tax penalties levied against productive economic behavior," thereby spurring "increased work, saving, and investment." With investment decisions "guided by profitability rather than tax status," as they would be with a flat tax, national wealth would increase by as much as $1 trillion. Individual and corporate taxpayers would both be able to submit their tax returns on a form the size of a postcard. The tax code would no longer "penalize success and discriminate against citizens on the basis of income." Deductions, loopholes, credits, and special preferences would be eliminated, and government auditors would have less opportunity to treat American citizens like criminals.
