April 14, 2008 - 8:08am
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John Stephen Calls Tax System Broken, Calls For Reform

By Brian Lawson, PolitickerNH.com Reporter

MEDIA RELEASE                                             CONTACT: For Immediate Release                                            Greg Moore April 14, 2008                                          
 John Stephen Calls Tax System Broken, Calls For Reform Candidate Lists Top 10 Reasons For Tax Reform On Eve Of Tax Day
 MANCHESTER, NH- On the eve of Tax Day, 1st District Congressional candidate John Stephen today listed the "Top 10 reasons for tax reform," describing the current tax code as a broken system.  Stephen called for comprehensive tax reform to simplify the existing system to one that individuals and businesses can easily understand and to remove the disincentives to growing the economy and providing more choice for Americans.
"A great nation deserves a better tax code than what we have today," said Stephen.  "Our current tax system is smothering small businesses and stifling economic growth, while it confuses individuals and leaves many feeling that the process is unfair.  Congress must give our citizens and companies a better option.  That's why I support giving a choice between the existing tax code and a simple, flat tax.  My guess is that the current system doesn't stand much of a chance."

Stephen said that while the tax code has failed many Americans and businesses, there is one group who has done well by the complexity and constant growth of the current system: Washington tax lobbyists. As companies and industries deal with the burdensome tax consequences of the existing code, many hire lobbyists to identify ways to reduce their tax liability.

"We have created a system that encourages people and businesses to seek out loopholes and other avenues to get around the cumbersome tax code," Stephen added.  "While it makes sense for each group to help their industry, it turns our entire system into Swiss cheese.  We should not be using the tax code to pick winners and losers, but instead work to reduce the burden on everyone, across the board."


 John Stephen is the former Commissioner of Health and Human Services.  Prior to that position, he served as the Assistant Commissioner of Safety, where he also served as the state's first Homeland Security Coordinator.  Stephen also served as a prosecutor for 10 years, in Hillsborough County and as an Assistant Attorney General.  He is a Manchester resident.
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TOP 10 REASONS FOR TAX REFORM
 10. The Alternative Minimum Tax The Alternative Minimum Tax (AMT) was put in place in 1969 as an effort to stop a small number of then high-income individuals and corporations from avoiding paying federal taxes through the use of deductions and exemptions.  Those individuals and businesses subject to the AMT lose the ability to take many deductions in order to pay a minimum tax.  However, the AMT was never indexed to inflation or adjusted based on the many tax cuts passed since 1969.  As such, many middle-class families are now subject to the AMT.  In 2006, the IRS' National Taxpayer Advocate called the AMT "the single most serious problem with the tax code."  The Congressional Budget Office estimates that as many as 38 million Americans will be impacted by the AMT by 2011.
 9. Compliance Costs The Tax Foundation estimates that Americans will spend 6.6 billion hours per year filling out tax forms.  They estimate this amounts to $325.7 billion in compliance costs, or roughly 23% of total federal income tax revenues.  All of this time and effort represents energy that could be far better directed into our economy.
 8. Tax Evasion The IRS estimated that in 2001, tax evasion amounted to $345 billion in losses to federal revenues.  That figure has undoubtedly grown in the following years.  Tax evasion is possible in large part due to the complexity of the tax code, where individuals and businesses claim inappropriate deductions or simply do not report income because they do not understand the tax code and their liability.
 7. Corporate Tax Rates Right now, America, at 35%, has the 2nd highest corporate tax rate among industrialized countries behind only Japan, according to the Tax Foundation.  We have stood still while the rest of the world has cut their corporate tax rates in order to attract business in an increasingly competitive global environment.  Not only is this a disadvantage for companies who have to compete against foreign rivals, it creates a significant incentive for American companies to leave their operations here and move overseas.  Small business in particular can not afford the massive burden and be expected to grow at its full potential and create good, high-paying jobs.
 6. Death Tax The Death, or Estate, Tax is a tax on the assets in one's possession at the time of an individual's death.  Scheduled to be eliminated in 2010, the Death Tax comes roaring back a year later, when the tax cuts of the past decade are repealed.  The Death Tax requires that one's heirs pay up to 47% in federal taxes on the assets remaining.  This often has the effect of forcing families to sell or close businesses and break up or liquidate assets, solely to pay the Death Tax.  Needless to say, this disruption hurts the economy while forcing grieving relatives to deal with the consequences of the tax man darkening the door.

5. Corporate Depreciation Schedules When an American company makes a major purchase, it cannot simply "write off" the cost of that purchase for the year it was made.  Instead, each business must use a complex depreciation schedule, based on the type of item and its cost.  This raises the cost of capital; creates a disincentive for purchasing, which limits job creation; stifles innovation, as it can delay or forestall purchase of infrastructure; and puts American companies at a disadvantage against foreign competitors, whose nations have already begun to allow first year write off of new equipment.
 4. Employer-Only Full Deductibility Of Workers' Health Care The tax code gives full deductibility for employers' purchase of employees' health insurance.  This tax provision does not, however, extend to the self-employed, those who do not receive insurance through their employer and those employees who wish to opt out of their employers' health insurance and purchase their own plan.  These individuals have to pay taxes on a portion of the costs of their insurance.  This bias towards employers limits employee options while increasing the number of uninsured.
 3. Incomplete Access To Defined Contribution Retirement Plans While about two-thirds of American workers have access to a defined contribution retirement plan, such as a 401k, employees with a defined benefit program, such as a pension, cannot receive the tax benefit of putting money into a retirement program that they can control.  This leaves these workers' retirement savings in a position where it could be misused or abused by those who manage their retirement savings.
 2. Employer Tax Withholding By taking money out of each paycheck, employees rarely sense the full magnitude of the impact of federal income taxes.  If employees had the option to pay in quarterly or yearly lump sum payments, they would get a full sense of the effect of federal taxes on their earnings, while at the same time, they could use these funds to accrue interest or grow their money in investments.
 1. Lack Of Transparency And Perception Of Unfairness Given the complexity of a tax code that exceeds 17,000 pages, very few Americans understand the tax code and why its many provisions exist.  This leads to a strong perception among many tax filers that they are being treated unfairly and being forced to pay more than their share.  This belief reinforces feelings of ineffectiveness, inefficiency and unfair treatment by the federal government.  This lack of simplicity and transparency undermines faith in our government.
BRIAN LAWSON is a PolitickerNH.com Reporter and can be reached via email at brian.lawson@politickernh.com.
Related topics: John Stephen, tax reform, Tax Day, Top 10 reasons for tax reform
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