In 2010, Americans spent 6 billion hours, which is approximately 8,800 lifetimes, and $480 billion doing their taxes.
This represents a huge deadweight loss — time and money wasted jumping through government-mandated hoops — for individuals and America’s economy.
It’s also why, regardless of how much how you think the federal government needs to collect in taxes, it is urgent that the federal government reform the way it collects taxes.
Every major GOP candidate for president has proposed a tax plan. How do they compare? With Nevada’s caucuses right around the corner, here’s a breakdown.
Mitt Romney: Gov. Romney’s 162-page economic plan certainly hits the right rhetorical notes on tax reform. He writes, “The best course in the near term is to overhaul and to dramatically simplify the current tax code…”
Despite his emphatic rhetoric, his actual proposals are really minor tweaks. They include maintaining the Bush tax rates, lowering the corporate income tax rate to 25 percent and eliminating the death tax. His stated “long-term goal” is to “pursue a flatter, fairer, simpler [tax] structure,” but he offers no definite “near term” proposals.
Rick Perry: Gov. Perry has proposed a Steve Forbes-like flat tax, which would lead to a tax return that the average person could complete in about five minutes. His proposal is a 20 percent tax on income, with a $12,500 exemption for each person in a household and deductions for mortgage interest, charitable contributions, state and local taxes and capital gains and dividends.
It’s a simple plan, except that Perry is also proposing to make it an optional plan. He wants taxpayers to be able to choose between his flat-tax plan and the existing tax code, which would actually make doing taxes more, not less, complicated.
He’s also proposing to eliminate the death tax, eliminate the tax on social security benefits, dividends and long-term capital gains, and reduce the corporate tax rate to 20 percent.
Newt Gingrich: Gingrich’s plan is similar to Perry’s flat tax, except that he is proposing a 15 percent flat tax with a $12,000 personal deduction. He would maintain the earned-income and child tax credits and allow deductions for charitable giving and mortgage interest.
As with Perry, Gingrich is also proposing to allow individuals to choose between his 15 percent proposal and the existing tax code.
He’s also proposing to eliminate the death tax and tax on capital gains and reduce the corporate income tax rate to 12.5 percent.
Ron Paul: More so than any of the above candidates, Rep. Paul has a very detailed plan when it comes to cutting spending. His tax plan, though, most closely resembles Romney’s and offers only minor tweaks to the current system.
He wants to maintain the Bush tax rates, eliminate the death tax, lower the corporate tax rate to 15 percent and eliminate all taxes on personal savings for retirement.
Jon Huntsman: Gov. Huntsman’s plan for income tax reform is designed to be revenue neutral. Basically, he’s not proposing to change the amount of tax dollars the government collects with the income tax, but to change how they are collected, in order to eliminate the $480 billion in deadweight loss associated with the current system.
To do this, he would eliminate all deductions and credits while creating three lower tax rates of eight, 14 and 23 percent.
On top of this, he wants to reduce the corporate tax rate to 25 percent and eliminate the tax on capital gains and dividends.
So which plan is best?
Ultimately, that’s in the eye of the beholder. But here are three words that should help you evaluate the plans: simple, uniform and low.
Does a candidate’s tax plan simplify the system and reduce the burden and complexity of submitting taxes?
Does a candidate’s tax plan treat individuals equally and stop government from picking winners and losers using the tax code? The ideal tax code would treat those earning the same amount of money equally and not punish the rich — or the poor — for how much they earn.
Does the candidate’s plan lower taxes?
One important caveat on that last question: You must examine a candidate’s tax plan and a candidate’s spending plan. A candidate who cuts taxes, but then borrows trillions to continue our current unsustainable spending, simply kicks the can to the next generation.
When it comes to taxes, there’s plenty to talk about.