With the debate in Washington now focusing on tax reform, LFC would like to highlight some of the things it would like to see in reforming the tax code. There is talk about significant reform along the lines of the 1986 Tax Reform bill. Reform is badly needed and it could not come at a better time. The last 8 years has seen an economy with little or no growth.
The reform must come in the follow form:
1. Deep cuts in the rates
2. Filing simplification
3. Estate tax relief
Cuts in the rates, as in 1986 where the top rate fell from 70% to 28%, are what is needed to give businesses incentives to expand their enterprises. This business expansion is what leads to new jobs. Businesses must have incentives to take risk, invest in new plants and equipment, and eventually hire new employees. The business environment must change before any significant new job growth will take place.
The compliance cost to file taxes has become an enormous burden on the economy. Billions of dollars are spend every year to file taxes. This needs to change and simplification of the filing process to a simple form or postcard will free up these billions for more productive uses.
The estate tax must be reformed or eliminated. Small businesses are harmed by this tax because of the possibility of the business dissolving due to this onerous tax. Family farms would be preserved & other small business like retailers would be protected. Yet, under the current code, business owners are placed in the position of spending large amounts of money to arrange their affairs to minimize the impact of this tax to ensure the business continues if they want to pass it on to a family member.
