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Thursday, February 14, 2008

Tough Tax Questions for Presidential Candidates

The presidential candidates have mostly "tweaking" ideas for our tax system; they don't seem to be focused on the incredible budget and tax issues that will face the new president during the first term. Or, perhaps they just aren't being asked the right questions.

Pending fiscal challenges include:
  1. Imploding health care spending - how will the government be able to continue paying its health care bills and what tax reforms should be pursued to help control costs and get health care coverage for more people.
  2. The tax cuts enacted in 2001 and 2003 expire after 2010. That will cause a few million low-income individuals to start paying taxes and create a tax increase for millions more. Despite the tremendous cost of these cuts, it is unlikely that Congress will let them expire. But, how would extension be paid for? Also, the cuts tend to favor higher income individuals, what will the President suggest to try to make the system more progressive and how progressive do they think it should be.
  3. The Alternative Minimum Tax continues to grow in terms of billions of dollars generated and millions of individuals subject to it. This is a flawed tax that needs to be dealt with. Continuing to apply a $50 billion bandaid year by year is not a responsible way to design a tax system or manage a budget.
  4. There is a $345 billion tax gap (taxes owed that are not collected).
  5. Elements of our income tax have not moved into the 21st century way of doing business. For example, international rules written back when the US was a big part of world GDP may not make sense today.
  6. The system continues to just get too complicated which leads to errors and disrespect for the tax system.

So, what are some of the tough questions we should be asking candidates? Click here for a short article that explains more about the serious problems on the horizon and the tough questions we should be asking.

For some background on tax positions of the candidates, check out a helpful website from the Tax Foundation.

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