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Sunday, March 6, 2011

Senate Finance Committee Continues with Tax Reform Hearings

On March 8, the Senate Finance Committee will hold another hearing on tax reform. This one is entitled - "Does the Tax System Support Economic Efficiency, Job Creation and Broad-Based Economic Growth?" That is a good question. Some may ask whether that is what the tax law is supposed to do. Principles of good tax policy call for a neutral system - one that does not affect decision-making. It would be a good question to ask committee members if they think the answer to the question falls more into (a) or (b):

(a) The tax system should not be counterproductive to an efficient economy and job creation. For example, there should not be an extra tax charge for each employee hired or a 30-year depreciable life for manufacturing equipment.


(b) The tax system should have all kinds of special rules members of Congress and lobbyists think of to help some industries or taxpayers and for which everyone else can subsidize through higher taxes.

We have had (b) for a long, long time. Not only does it create inefficiencies, such as varying tax rates on different types of investment, it also makes the tax system more complicated from all of the special rules. And there are a lot of these special rules including for oil and gas, some energy activities, and shortened depreciable lives for certain restaurant equipment and race car tracks.

What do you think?

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