[Congressional Record (Bound Edition), Volume 154 (2008), Part 3]
[House]
[Pages 3631-3635]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        SIMPLIFYING THE TAX CODE

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 18, 2007, the gentleman from Texas (Mr. Burgess) is recognized 
for 60 minutes as the designee of the minority leader.
  Mr. BURGESS. And I thank the Speaker.
  Madam Speaker, it has been said over and over again that nothing in 
this life is certain except death and taxes. I was a practicing 
physician for over 25 years back in Texas and I've got to tell you, 
sometimes death seems a little less complicated than our Tax Code. The 
complexity of the Tax Code has done nothing but grow since the Federal 
income tax was first introduced in this body in 1913.
  When it was first created, the Tax Code was 400 pages. This year, it 
is 67,506 pages, nearly a 17,000 percent increase, pretty typical of 
government math. Because I'm a visual person, I would like to show you 
what the statistics look like.
  Here is a picture from the ``CCH Standard Federal Tax Reporter'' 
illustrating the exponential increase in the Tax Code. What this 
demonstrates, Madam Speaker, is way back here in 1913, we had one 
little 400-page book that was the Federal Tax Code, and then we fast 
forward to 2007 and 2008 and you see the number of pages now that fill 
the bookshelf, making the complexity of the code something that the 
average person, quite honestly just does not understand.
  Madam Speaker, remember that one of the fundamental tenets of the 
American legal system, including the tax system, is that ignorance of 
the law is no excuse. Therefore, in theory, every single American who 
is merely trying to comply with the Tax Code and file their taxes by 
April 15 is supposed to be familiar with all of the 67,000 some odd 
pages that are contained within the Tax Code which comprise the tax 
rules.
  Now, I don't know if my tax preparer back home knows all of the 
67,506 pages and you have to wonder about other people in other 
congressional districts. What about the small business owner? What 
about the single mom who is just

[[Page 3632]]

struggling to get by? How are they ever going to know all of the 
regulations contained within 67,506 pages of the U.S. Tax Code?
  The complexity of the Tax Code is a result of countless deductions 
and exemptions aimed at steering a social agenda, quite honestly, when 
it's supposed to be a Tax Code. That's one of the fundamental problems 
with our tax system, is that we try to enforce social policy through 
the Tax Code rather than seeing the Tax Code simply as a vehicle for 
collecting those revenues that the government has to collect in order 
to run. Special interest groups run rampant through every single page 
of that 67,000 pages. Anytime Congress wants to punish a special 
interest group or reward another, Congress adds a new credit or a new 
law to the mammoth Tax Code. The result is a Federal law fraught with 
opportunities for avoiding taxes and loopholes to be exploited at the 
expense of fellow Americans. Everyone is familiar with the problems 
inherent in our convoluted Tax Code, and criticizing the American Tax 
Code is as American as apple pie and baseball, and for good reason.
  Let me share just a few interesting facts on why we need fundamental 
tax reform. Each year, Americans spend 6.5 billion hours preparing 
their tax forms, and businesses spend 800 million hours complying with 
the Tax Code. The cost of compliance for Federal taxpayers filling out 
returns and related chores was $265 billion in 2005. The average 
taxpayer pays over $1,800 per household in compliance costs. In other 
words, that taxpayer works a little over a week just to pay for the 
cost of preparing his or her taxes for that year.
  A study was done back in 1998 when the forms in 1998 were less 
complicated than they are 10 years later, and it surveyed 46 tax 
experts. Each expert came up with 46 different answers when determining 
tax liability. Forty-six preparers, each given the same set of data, 46 
different figures to determine tax liability. The tax calculations 
themselves ranged some $34,000 to $68,000, almost a doubling of the 
original estimated amount.
  The Tax Foundation prepared the following information that actually I 
think will be of interest to this body:
  In the year 2007, a person spent 79 days working to pay for their 
Federal taxes and 41 days on State and local taxes for a grand total of 
120 days. That's more than health care, more than housing, more than 
transportation. And, honestly, you can see an immediate return on those 
categories. It's a little bit more difficult to see the tangible return 
on Federal tax dollars, albeit those are the moneys that are required 
to have the Federal Government run. But when you look at the bite that 
taxes take out of the average income compared with all of the other 
expenditures, it truly is significant.
  We all complain about paying our taxes. The fact is if the system was 
fair and simple, it would be a lot easier to take. Americans don't mind 
paying for roads. They pay for a strong defense. They pay for health 
care for your grandmother. It's the fact that one family makes exactly 
the same amount as the family next door, but they're forced to pay a 
higher share of the tax burden. The Declaration of Independence says 
all men are created equal, and that should apply to the tax burden as 
well.
  Now, let me just show you a breakdown by congressional district. Most 
Members of Congress should be interested in this chart, also produced 
by the Tax Foundation. In 2004, the Tax Foundation ranked Federal 
individual income tax burden by congressional district. My district, 
the 26th District of Texas, falls here somewhere in the middle, and it 
is highlighted in yellow so its easy for me to see, but it compares the 
ranking of Federal income tax burden as a percentage of the adjusted 
gross income versus the ranking of the average income tax liability per 
return. In other words, with identical incomes, we have some States 
with a much higher burden and some States with a much lower burden.
  Now that is an average across the population, so clearly there will 
be some differences, but we see New York represented in both the upper 
and the lower categories. We see California likewise represented in 
both the upper and the lower categories. So it's not inconceivable that 
the discrepancy should not be that large; but, nevertheless, because of 
the complexity of the Tax Code, that's one of the things we're left 
with.
  435 Members of Congress and here is the data from the top seven 
compared to the bottom seven. You can definitely see varying tax 
liabilities throughout the country. Again, my district ranked 139th in 
regards to the Federal income tax burden as a percentage of gross 
income, but ranked only 127 as the average income tax liability per 
return. Again, that's more of the Federal Government's math for you.
  And yet another aspect of complying with our Tax Code. Time is 
precious. We often don't have enough of it for personal things, those 
mundane things like earning a living, raising your family, spending 
time with your friends, and then there's the dollars-and-cents side of 
the equation where, in fact, time is money and valuable resources are 
misspent navigating tax law instead of spent growing the economy and 
creating jobs. Taken together, this is a strong prescription for real 
change in our Tax Code.
  We know what works when it comes to changing the Tax Code because we 
got a glimpse of it when during Ronald Reagan's administration he cut 
the Tax Code in half in 1986. As a result of that reform, the economy 
grew, revenues increased and jobs were created. I can't think of a 
better prescription for our slowing economy today than replicating the 
reform of the Tax Code on an even greater scale.
  So what should we do? The prescription is fairly simple. Flatten the 
tax, broaden the base and shift the burden away from families and small 
businesses. Simplify the Tax Code and make it easier for individuals 
and businesses to file their taxes and pay their fair share. Even the 
National Taxpayer Advocate, Nina Olsen, stated simplify the Tax Code as 
one of her recommendations in the 2007 Annual Report to Congress:
  ``The complexity of the code increases the likelihood that honest 
taxpayers will make inadvertent mistakes, creates opportunities for 
taxpayers to avoid paying their fair share of taxes, and makes it 
difficult for the Internal Revenue Service to administer the tax 
system. Simplifying the tax law could improve the audit process and 
allow less taxpayer burden.''

                              {time}  2030

  Pretty simple stuff. Pretty straightforward. If the National Taxpayer 
Advocate thinks it is best for our constituents if we simplify the 
system, it would make sense that Members of Congress on both sides of 
the aisle would agree with this sentiment and work toward this goal.
  Now, this next data I need to credit to some polling done by American 
Solutions. They conducted a nationwide poll on six different topics, 
with one being taxes and jobs. This poll crossed gender, ethnicity, 
economic and party lines, and they discovered the following opinions in 
America. Under taxes and jobs, 69 percent think the Federal income tax 
system is unfair. Seventy percent favor tax incentives for companies 
who keep their headquarters in the United States of America. What a 
great concept. Eighty-two percent think the option of a single rate 
system would give taxpayers the convenience of filing their taxes with 
just a single sheet of paper. Pretty powerful stuff. Eighty-two percent 
want to be able to file on a single sheet of paper.
  Madam Speaker, it sounds to me as if America has spoken fairly 
clearly on this subject, and the evidence is that we do need real 
change in our tax system. The encouraging news is that we have a 
practical and effective blueprint for making this real change across-
the-board. The blueprint is called the flat tax.
  In 1981, Robert Hall and Alvin Rabushka proposed a new and radically 
simple structure that would transform the Internal Revenue System and 
our economy by creating a single rate of taxation for all Americans. 
Today, several States have implemented a single

[[Page 3633]]

rate tax structure for their State income taxes and from Utah to 
Massachusetts, citizens are seeing the benefit.
  In Colorado, a single rate generated so much income, so much revenue, 
that lawmakers actually reduced the rate 10 years after its 
implementation. In the State of Indiana, the economy boomed after a 
single rate went into effect in 2003, and in that time corporate income 
tax receipts have risen 250 percent.
  In 1981, a simple concept put forth by Robert Hall and Alvin 
Rabushka, revisited in 1995 by my predecessor in this body, former 
majority leader Dick Armey, and, most recently, within the last couple 
of years, a book published by Steven Forbes on the flat tax revolution. 
All of those authors, all of those authors calling for the same type of 
reform in our Tax Code, to allow it to be flatter, fairer and simpler.
  Now we have got several Members of Congress who are actually working 
on the problem. Certainly it is something that I remain focused on. 
Congressman David Dreier from California, the ranking member on the 
Rules Committee, and Paul Ryan of Wisconsin, the ranking member on the 
Budget Committee, are all working to establish the single tax rate 
structure for the United States. Members are working on it in the other 
body as well. Each of us have our own ideas. The legislation proposed 
is a little bit different, but it all has at the center of it the 
concept that you should be able to file your taxes on a single form at 
a much flatter rate that will be fairer across-the-board, and, in fact, 
evidence has shown that it will actually increase revenue.
  The bill that I introduced actually two Congresses ago, and I have 
continued to introduce it every year, H.R. 1040, it makes it easy to 
remember the number, H.R. 1040 allows for a person to opt in to a flat 
tax. They can't go back and forth from the old IRS code and the flat 
tax, but if they elect to go into the flat tax, they may do so.
  If quite honestly they have constructed their family or business 
finances such that they have been trying to utilize the code to 
maximize their effectiveness, no one is going to require them to go 
into the flat tax. They may stay under the old IRS code. But for a lot 
of people like myself, regardless of whether I would come up better or 
worse under the flat tax, just to give up that shoe box full of 
receipts every year, to give up that quality time spent with my 
accountant every year, to give up that $1,800 or $2,500 that I spend 
every year on tax preparation, and I promise you, mine are not that 
complicated, I would gladly give that up to be able to simply file my 
taxes on a single page form, or, better yet, populate a field on a 
computer screen on the Internet, click a mouse, send it in, and be done 
with it for the year.
  Now, we all may not agree on just a single rate. I have mentioned 
some other individuals that have other bills, and they do have 
different approaches. We may not all agree on whether it should be a 
single rate or two rates, as it was back when Ronald Reagan simplified 
the Tax Code. We may prefer a tax method that does allow for deductions 
for mortgages or charitable contributions. But regardless, regardless, 
each of them embodies the fundamental principle that each American 
should bear the burden of taxation equally and at the lowest rate 
possible; we think everyone should be able to do their own taxes 
without the help of a professional and should be confident that people 
who earn the same income pay the same taxes.
  Madam Speaker, just as an aside, I remember back in the year 1993, I 
was just a regular guy working in a medical practice back home in 
Texas. It just so happened that that year, the President of the United 
States and myself had an almost identical income reported. And yet when 
you calculated what I paid as a percentage of income, it was in excess 
of 30 percent. When you calculated what the other individual paid, it 
was around 20 percent. So why the discrepancy? With the same amount of 
earned income, why should there be such a vast difference in the taxes 
owed and the taxes paid? That is really what got me to thinking about 
this subject, many, many years ago.
  We all remember when the Tax Code was changed in 1993. It was changed 
retroactively so that we got both the rich and the dead involved in 
paying additional taxes. But it really got me focused. Then in 1995 
when Congressman Armey published his book on the flat tax, I read it, I 
became a believer, and have continued to study the issue and have 
continued to talk about the issue. And this is the time of year to have 
these types of talks, because I do think it is important, regardless of 
which party is in power, that we take seriously the will of the 
American people. Eighty-two percent, 82 percent, want to be able to 
fill out a single page form and be done with their taxes.
  Just by way of comparison, according to the Wall Street Journal, 
citing a blog off the National Taxpayers Union website, there are about 
1.2 million or more professional tax preparers during tax season, which 
equals roughly the population of Hawaii. There are 836,000 doctors in 
the United States. As a physician, I think that there is something a 
little askew with this number, that we require half again as many tax 
preparers in the country as we do physicians. Healers shouldn't be 
outnumbered by tax preparers. The government math stuff is starting to 
scare me, and really should start to scare a lot of Americans.
  Also, according to the Wall Street Journal, more than half of the 
individual taxpayers now use a paid preparer for their income tax 
return. I do myself. Mine is not that complicated, but I don't dare go 
into the process without a professional guiding me, lest someone at 
some point say, hey, you made a mistake. I want a professional with me 
if I had to go in to justify what those numbers read on the form.
  We actually anticipate the number of people using a paid preparer to 
increase this year. In 1960, less than a fifth of taxpayers used 
preparers. More than half now. Less than a fifth, less than 20 percent, 
back in 1960. In 2005, one of the most famous tax preparation companies 
garnered $2.4 billion in revenue from the United States in tax 
preparation, up from $841 million 10 years before in 1996. Pretty 
astounding. Pretty astounding figures when you stop and think about it.
  Now, I respect and I fully appreciate everything that my tax preparer 
does for me, what my accountant does for me, what tax preparation 
companies do, and I think it is a shame that Congress has created a 
system that is so complicated that more than half of the public feel a 
need to pay someone, to pay someone else, just to figure out how much 
they owe for their tax liability. The system doesn't have to be that 
complicated.
  Now, bear with me, if you would, through one last poster, and this 
really sums it up. A faster, flatter, fairer tax structure, let me show 
you how it works. It is pretty simple.
  Here we go. You put in a little bit of information, like your name; a 
little bit of identification data, income, personal exemptions, married 
filing jointly, single head of household; number of dependents. You add 
up your deductions. Taxable income is line 1 minus line 3. One 
subtraction equation on the form. And then calculate the amount of tax 
owed on this particular form, calculate by multiplying line 4 by 0.19. 
The tax is already withheld. Your tax refund you are owed or the taxes 
you are to pay. What did that take? According to the clock up there, a 
little less than 30 seconds. Thirty seconds, and your income taxes are 
done.
  Now, in all honesty, I haven't started my taxes this year. Please 
don't tell my accountant. But I will spend the better part of a 
Saturday afternoon, probably this coming Saturday, going to all those 
places in the house where I have secreted away little receipts and 
things that I knew I would need when it came time to prepare my taxes. 
I will gather all of this stuff together and put it in a form that is 
presentable, take another half day and spend that with my accountant. 
He will spend several weeks churning it through whatever computer 
program that he uses. And then right before midnight on April 15th, I 
will get my tax form to sign, and I will send it in and I will either 
pay a little in taxes or I will get a little bit of refund.

[[Page 3634]]

  But look at this. Thirty seconds. Your name, a little bit of 
identification data, a couple of numbers that are easy to obtain, and 
taxes are already withheld, your tax liability or your tax refund. No 
expensive tax attorney bills. No more hours of stressful research 
trying to figure out whether your military service or your marital 
status will adversely affect your return. No more headaches trying to 
determine where the estimated tax payments go. No more Congress taking 
one special interest group over the other trying to create social good 
works through the Tax Code. Instead, just a very simple and 
straightforward system. And remember that number: 82 percent of 
Americans want something simple like this for their tax preparation.
  Now, in my opinion a single tax rate structure would eliminate taxes 
on capital gains, eliminate taxes on dividends and taxes on savings. 
You know, we always hear that our savings rate in this country is 
really pretty low, and that in fact is one of the things that may be 
behind some of the financial crisis that we find ourself in now.
  I will just tell you there was a time when I was in business for 
myself that I thought the prudent thing to do would be to hold three 
months, three months, of operating capital in some easily convertible 
security, like a CD, something that was fairly liquid, earn a little 
bit of interest along the way, and have that money in case the dire 
wolf was ever at the door and I needed those funds to continue to 
operate my business. It seemed like a prudent think to do.
  But here is the deal. You earn some interest, but guess what? It is 
taxed at regular income rates. So it is suddenly eroded by, at that 
time almost a half, now around a third. And then if you ever get to the 
point where, okay, I am going to bring that money back into the 
business and pay it out in salary, well, guess what? If you have held 
it for over a year in that money market or CD, your business had to 
report that and pay taxes on it at the end of that first year, and then 
when you do dispense it as earnings to the owners of the business, 
guess what? It is taxed again. So it got taxed twice.
  So for doing the prudent thing, the prudent thing, holding 3 months 
of capital in a relatively liquid account so you can get to it if you 
need it, for doing the prudent thing, you are punished on the interest 
you earn. So that is not a good deal. You have got to pay taxes on it 
from your business, and, oh, by the way, if you ever do pay it out to 
yourself in salary, you get taxed again. So you have been taxed three 
times on that money that you thought you were doing the right thing. 
You were putting it away against perhaps a lean month or two. Maybe 
those Medicare payments didn't come through as fast as I would like, 
or, God forbid, the SGR cut my payment again for Medicare 
reimbursement, I would have a little cash to fall back on. But, guess 
what. If you do that, if you do that, you are actually hurt.

                              {time}  2045

  If we were to change the Tax Code, again, with a single rate 
structure, no capital gains tax, no taxes on dividends, no taxes on 
savings, which is extremely important, and I personally would eliminate 
the Clinton tax on Social Security earnings, what would happen? 
Personal savings would increase.
  Would that be a bad thing? Does anyone in this body think personal 
savings would be a bad thing, particularly given our current economic 
situation? Businesses might just actually expand and create jobs. Would 
that be a bad thing given our job creation numbers this past month? We 
lost a bunch. We didn't create anything.
  Without the heavy corporate income tax, which is currently the second 
highest in the industrialized world, companies would have less 
incentive to offshore their headquarters and offshore their earnings. 
If they had less incentive, and those earnings and headquarters stayed 
in this country, wouldn't that ultimately be a good thing for the state 
of our economy?
  So it really comes down to an all-American principle of freedom, and 
it comes in a prescription. The decision to move to a single-rate 
system would be entirely up to the business, not up to the government. 
This would be an optional program. If someone has constructed their 
domestic finances or their business finances to maximize their earnings 
under the current Federal Tax Code, stay in the code, that would be 
your choice.
  But if you are tired of the shoe box, if you want to fill out a 
single-page return, single-page form, and then have the rest of that 
time, that half day I am going to spend on Saturday and that other half 
day I am going to spend on a week, if you would rather have that day to 
spend with your family, take a personal day off, go fishing, whatever, 
earn more money, whatever, that's yours. You don't owe it to the 
government any more.
  A flat tax would be less costly. It would save taxpayers $100 billion 
a year and would reduce cost of compliance by over 90 percent. The 
resulting increase in personal savings, well, wait a minute, didn't we 
just pass a big stimulus package? That would have an immediate effect 
on our American economy by putting that money back in the hands of 
productive people in this country.
  As I said earlier, recent polling by American Solutions shows that 
over 80 percent of Americans favor an optional, single-page, one-page 
tax form with one rate. After all, is anybody really going to complain 
if this one time, this one time Congress does something worthwhile and 
actually makes something easier? After all, who could complain about 
making something easier, especially a process that comes with such a 
high cost?
  One of the things we haven't even talked about, and you now hear 
talked about all the time, is the compliance gap, the 200 to 300 to 
$350 billion that it's estimated that is owed in taxes but it's not 
paid in taxes because it's simply too hard to go through all that you 
have to go through to comply with the IRS code or you are worried about 
making a mistake and going to jail for misrepresenting yourself on your 
tax form.
  So that compliance gap, the tax gap as it is called, you will hear 
people talk a bit on both sides of the aisle. They want to utilize, 
well we are going to go out and do a better job of collecting the 
taxes, so we will use that $350 billion to offset an increase in the 
farm program or AMT patch, or, God forbid, we would fix the SGR formula 
for patients and doctors across the country. But you always hear people 
talk about that tax gap that they are going to collect that $300 
billion and put it to some other good work, but this gets rid of the 
tax gap. It's gone tomorrow.
  You wouldn't have to worry about people not complying with the code 
because it would be so simple. The cost of not complying would be high. 
The cost of complying would become much more bearable.
  Well, guess what? This is a very political year. Everywhere you go, 
people are talking about change.
  I will tell you what, I haven't heard the word ``change'' so much 
since I was an intern at the newborn nursery at the Parkland Hospital 
back in the 1970s. Everyone is talking about change. You turn on the 
television, people are talking about change.
  Let's consider how that change could improve one of the most 
complicated of institutions, the Internal Revenue Service. More 
importantly, let's consider how that change could deliver prosperity, 
deliver time back to America's families and to America's taxpayers.
  You know what, when it gets right down to it, that's a stimulus, 
that's a stimulus that every American could understand and every 
American could be for. That's a stimulus package that everyone on the 
floor of this House should consider and vote for.
  I have got a bill, H.R. 1040. Ranking Member Dreier has a bill, 
Ranking Member Paul Ryan has a bill. I think all of those are worth 
looking at. I would like to see those brought up in the appropriate 
committee of Ways and Means, the Subcommittee on Taxation. Let's have 
the debate; let's have the argument. Let's do it out in the open.

[[Page 3635]]

Let the American people hear our debate, and let them decide who is 
arguing on their behalf and who is arguing on behalf of the special 
interests. I think it would become quite clear after just a few minutes 
of that debate.
  Again, here is an opportunity to give time and money back to the 
American people. That is a stimulus package of which this body, both 
sides of the aisle, could be justifiably proud.

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