Thoughtful tax reform is doable. Let’s get started.

by Becki Gray

Thank goodness we’re seriously talking about tax reform.  A system that was set up in the 1930’s based on an economy driven by manufacturing and agronomy needs a complete re-vamp.  Study committees, lawmakers, economists and others have looked at reform for 20 years with no real changes but an even more convoluted, complicated system and less transparency system than we had to start with. Despite good intentions, tax reform has not happened because it’s hard and it’s complicated. In order to tackle it, I suspect we’ll have lots of ideas on the table with plenty of debate and discussion. Good.

The Senate proposal is based on revenue collected through sales tax which broadens the base and lowers the rate while eliminating corporate, franchise and income tax.  Concerns include a new business tax generating twice the revenue derived from the corporate and franchise tax, a new tax on real estate transactions and asking businesses that have never done so to be state government’s tax collectors.

Another proposal would eliminate corporate, estate and state sales tax altogether and be based on an Unlimited Savings Allowance (USA) consumption tax replacing the personal income tax. Here’s how it would work – take your income, deduct all charitable giving and savings, assume you spent everything else.  On that remaining amount, you’d pay a flat rate of 8.5%.  A study shows this plan would create 80,000 new jobs in the first year it was in place.  Concerns about administration seem to be solved by setting up a Carolina USA through participating financial institutions to ensure accurate reporting and accountability. The plan eliminates tax discrepancy between internet sales and brick and mortar stores and puts the government in charge of collecting it’s taxes.

Lots of talk, ideas, debate and vetting of numerous plans hopefully will result in comprehensive tax reform that is simple, transparent, fair, provides stable revenue and, most importantly, will encourage economic growth and job creation.  The Senate has done a good job of starting the debate on real tax reform. It’s a challenging job, but substantive, thoughtful tax reform is doable. Let’s get started.

Becki Gray is the Vice President for Outreach at the John Locke Foundation and a panelist on NC SPIN.