The old rhetorical song on tax cuts has always been: you know how to best spend your money, not the federal government.  For the past five years, Congress has done much to return the power of the purse to the people, arguing that fiscal conservatism is good for the family budget as well as the federal budget.  Tax cuts also contribute to the overall health of the economy.

 

Though all of these arguments are made more with rhetoric and less with numbers, because it is nearly impossible to predict the future effect of tax relief, some numbers do exist.

 

A recent vote in the U.S. House of Representatives affirmed our commitment to taxpayer-friendly fiscal policy.  First, the bill would reduce the 15 percent tax bracket to 10 percent by 2008, eliminating some tax liability for the majority of taxpayers. 

 

Secondly, the proposal extends relief from the dreaded Alternative Minimum Tax for another year.

 

Next, the bill extends the lower rate on dividend income through 2010, a provision already written into tax law, preventing a $13 billion tax increase over the next four years.

 

And finally, the bill extends the lower tax rate on capital gains, another existing law which is set to expire soon.  This measure would prevent another $7 billion in tax increases over the next four years.  One in two taxpaying senior citizens would benefit from an extension of the dividend income tax relief, and one in three taxpaying senior citizens would benefit from an extension of the capital gains tax relief.

 

All of these provisions combine to form a proposal that maintains the positive effect for families of the tax relief passed by Congress four years ago, in addition to the positive effect those changes to our tax code have had for the U.S. economy in general.  In particular, extending the tax cuts is important to Americans who depend upon fixed income from their investments to maintain their quality of life during retirement.  It also helps middle income families who are dangerously close to drifting into the creeping territory of the Alternative Minimum Tax. 

 

Yet this is only half of the case for reform.  These are, at best, stopgap measures that patch the levee, but do not abate the flood.

 

This year, millions of Americans again struggled with the onerous, complicated, mammoth law we call the U.S. Federal Tax Code.  There are a whopping 66,498 rules in the tax code – 40 percent more than there were in the year 2000.  Countless other statistics support the case for tax code reform, but bureaucrats in Washington DC every year allow the tax code to get more and more complex. 

 

As we add layer upon layer of complication to the tax code, working Americans are the ones who suffer.  The typical family spends 26 hours preparing federal taxes.  A staggering 60 percent of Americans require the assistance of a professional to prepare taxes, at a cost of $150 billion each year. 

 

The only good news to get us through this difficult process year after year is that Congress is working to keep taxes low for working families.  Where we cannot reform the tax code, we must reduce it, and in this way, the American people can use more of their earnings to invest in themselves.