Despite Scuffling, Tax Bill Is Badly Needed

The fight for tax reform has always been an uphill battle, and the procedural setback in the House of Representatives on Wednesday certainly proved that. But aside from all the fingerpointing and party politics, let’s not lose sight of the fact that we really do need to overhaul the tax code.

Last year about 3,000 millionaires didn’t pay a dime in U.S. income taxes. Half of the largest and most profitable corporations in the country paid no taxes in at least one of the last four years, and some of them even got money back from the government.

That’s what I call legalized tax evasion. Wealthy individuals and corporations are milking the loopholes in the tax code to avoid paying taxes, and the lion’s share of the cost of government is falling squarely onto the backs of middle- and low-income taxpayers.

That’s not fair. The average taxpayer knows that he’s being taken for a ride.

But at the first mention of the words tax reform , millions of eyes glaze over. People are skeptical of empty promises to make the tax system fairer. Both the President and Congress have been talking about tax reform for a full year now. When are we going to see some action?

The answer is: Now. Assuming that the procedural question is settled today, the House will finally have a chance to vote on the tax-reform bill written by the Ways and Means Committee. It’s a pretty good stab at substantive reform.

Like President Reagan’s tax-reform plan, our bill cuts tax rates and abolishes many of the tax loopholes that are keeping billions of dollars out of the U.S. Treasury. Overall, we kept most of the President’s initiatives intact. The big difference is that we were less generous to corporate and wealthy taxpayers.

Under our legislation, business will pick up a larger share of the tax burden than it has been paying for the last five years. And individuals will pay less. We shift $141 billion away from the individual and make corporations pay about what they were paying back in 1980, before the President gave them a tax reduction.

We accomplish this by setting up a tough minimum corporate tax and by closing loopholes that are allowing some corporations to pay no taxes at all.

At the same time, by closing down some tax shelters, we restore economic rationality to investment practices in this country. We put business on a level playing field so that investment decisions are made on the basis of sound business practice, not on how much income they can shelter.

So if tax reform gets corporations to pay taxes just like the secretaries and the clerks who work for them, where do individual taxpayers stand?

Under our bill, we raised the personal exemption and cut tax rates so that 88% of all Americans will either receive a tax reduction or pay about the same as they do now. On the average, middle-income taxpayers will receive about a 10% tax cut and 6 million of the low-income working poor will be totally exempt from the tax rolls.

As far as deductions are concerned, the Ways and Means Committee bill retains the major reductions that most Americans depend on. We kept the state and local tax deduction, which the President would have eliminated, and also charitable deductions and the tax-free status of fringe benefits such as company-paid health insurance.

The result is a bill that I think is fairer and better than the current tax code. It may not be perfect, and I admit that it’s not much simpler. But, as a result of this bill, a whole lot more low- and middle-income Americans will be enjoying more of the fruits of their own labor.

Not surprisingly, a small army of special interests opposes this bill. I have personally met with hundreds of lobbyists who predict nothing short of Armageddon if this bill is passed.

However, that’s not to say that business as a whole opposes our tax package. Big names like General Motors, IBM and hundreds more support it and say that it will improve the climate of business production in this country.

In many cases those who oppose the bill are the ones who are most interested in preserving their own tax breaks. If you lump together all the businesses that oppose tax reform, their combined average tax rate is about 4%. They know which side of the bread is buttered.

These are the people who are lobbying members of Congress at this very moment to vote against tax reform. And, if they succeed, the average American taxpayer won’t just lose now. He or she will lose for a long time to come, because this is our only shot at reforming the tax code.

In order to keep tax reform alive we need bipartisan support in the House. We’re counting on the President to sustain what he calls “the second American Revolution” by persuading Republicans and Democrats alike that he hasn’t deserted his troops and that he wants to make his No. 1 domestic policy initiative a reality.

For tax reform it’s now or never. Either we win the first battle in the revolution or we keep the kings on their thrones for a long time to come.