SensibleTaxReform Blog

6. Sensible Tax Reform–An Economically-Effective Tax

The two previous posts have focused upon the simplicity and justice aspects of Sensible Tax Reform–Simple, Just and Effective. This post will examine the third element: economic effectiveness.

Efficient or Effective?

Some analysts would describe our Internal Revenue Code as “efficient.” That is not always an adequate attribute. As Blog #1 noted, the tax historian, Charles Adams, has colorfully observed that “The income tax…can be likened to a dirty industrial smelter that does an efficient job, but pollutes the air, poisons the streams, and kills the forest.” As Adams’ observation notes, the existing tax code may be efficient—it collects a lot of taxes. However, in the process, it does a lot of harm. Efficiency alone is not sufficient. What we need is a wholly new tax system that is not only economically efficient but also, more importantly, effective.

Efficient and Effective!

Unlike our existing tax code, which has very many negative impacts upon the American economy, Sensible Tax Reform—Simple, Just and Effective has been carefully designed to be economically effective—for all sectors of the economy:

• For families, STR will raise income, increase both the ability and incentive to save and eliminate most of our current tax-compliance costs and burdens.
• For businesses, STR will eliminate most of their federal taxes, their tax-compliance costs and the distortions that tax incentives encourage.
• The overall economy will be very strong and millions of jobs will be created.
• For the federal government, under STR the collection of taxes will be much simpler and more predictable, with less avoidance and evasion.
• Interest rates will decline and a strong economy will likely yield a strong stock market.
• Despite the lower interest rates, both households and businesses will have less incentive to borrow as heavily as they do now. That lower debt will be safer for them and for our overall economy and society. That would greatly reduce the terrible cost of another Great Recession such as we had in 2007-2010.
• Internationally, American businesses will be much more competitive in both export and import markets, our trade and current-account deficits will shrink greatly and our government’s need to borrow abroad will decline massively.
• American companies will no longer have a tax incentive to use deceptive accounting techniques to move profits abroad. Much of the profits that are hidden abroad now will return home.
• The United States will become a veritable tax haven. American companies will stop moving their headquarters abroad for tax reasons. Foreign companies may even be attracted to moving here.

Simplicity, Justice and Effectiveness

Many tax proposals claim to be trying to simplify and improve the justice of our tax system. We have observed that not only do they almost all fail badly in those tasks but they also almost always harm the American economy. Sensible Tax Reform—Simple, Just and Effective is different.

• It is simple—very simple.
• It is just—very just.
• And it is economically effective—very effective.

The next few posts will examine the specifics of the STR proposal.

Tags: #tax reform

No comments yet.

Leave a comment