I shared my thoughts about tax reform with the Senate Budget Committee earlier today.
Not surprisingly, I testified that the ideal tax system should have the lowest-possible rate, no double taxation of income that is saved and invested, and no corrupt and inefficient loopholes. In other words, a flat tax.
You can peruse my entire testimony on the Cato website.
In addition to talking about the flat tax, I also focused on the importance of economic growth – something that will be less likely if the tax burden is increased. Here’s a table from the Congressional Budget Office’s recent Economic and Budget Outlook, showing how even tiny differences in economic growth have a big impact on tax revenue.
Another point I made is that the government will collect more revenue, even if tax rates stay the same. This is because of something called “real bracket creep,” which occurs under a “progressive” tax system even if economic growth is mediocre.
Here’s a chart from the CBO long-run forecast, showing how the burden of taxation will climb in coming decades.
And here’s a chart showing how income tax receipts will reach record levels – even if the 2001/2003 tax cuts are made permanent.
One last point. I was impressed by Senators Ron Johnson of Wisconsin and Kelly Ayotte of New Hampshire. I hadn’t seen either of them in action.
Sen. Johnson’s comments and questions showed that he was fully aware of the DC scam of fake spending cuts. And Sen. Ayotte was completely aware of the self-destructive impact of America’s worldwide corporate tax regime.
Let’s hope they stay hard core and don’t “grow in office.”