Publications

Advocates for tax reform must confront the current tax subsidy for employer-based health insurance, which distorts the market for private health insurance and penalizes those who do not obtain health insurance through an employer. The current scheme should be changed to a straightforward system of credits to empower individuals to make their own health care choices. This would eliminate the current discrimination and tear down this barrier to fundamental tax reform.

Tax reform should encourage investment in physical capital through expensing, and it should encourage investment in human capital through expensing as well. Tax reform will also remedy other areas of the tax code such as high marginal tax rates and progressive taxation that discourage people from acquiring extra skills and punish them as they deploy their talents and abilities—their human capital.

Our current tax system puts U.S. companies at a disadvantage in their efforts to compete internationally. Remedies thus far have been a hodgepodge of international tax rules that often operate at cross-purposes, create perverse incentives, and incur the ire of international trade organizations. A reformed tax code including territorial taxation would better serve the vital interests of the United States.

Complying with the current income tax code costs Americans 3 million person-years each year. This represents a deadweight loss to the economy and resources that could have been spent on otherwise productive efforts. The chief source of federal tax complexity is the income tax. Substantial reform can come only from replacing the income tax system with a consumption-based system such as the flat tax, a national retail sales tax, or a consumed income tax.

The solution to looming Social Security shortfalls is increased economic growth. Personal retirement accounts, owned by workers and invested in real assets, would prefund benefits and could provide new saving and investment critical to economic growth, provided that tax reform makes saving and investment in the U.S. more attractive. Thus the path to Social Security reform is through tax reform.

Americans suffer from an assault on their privacy because of the way our tax code taxes income. Fundamental tax reform is the key to redressing this invasion of privacy, but proposed international “information exchange” rules would undermine any potential for tax reform and privacy protection. These new rules should be opposed, and tax reform pursued, to protect the privacy of American taxpayers.

A significant problem of the U.S. tax code is that it discourages saving and investment critical to economic growth. Fundamental tax reform toward greater reliance on consumption taxes would increase national saving, reduce the cost of capital, and lead to higher levels of capital formation and GDP. Such a move would be an important policy lever for achieving stronger economic growth, higher living standards, and greater national security.

One of President Bush’s most controversial campaign proposals was to let workers place a portion of their Social Security payroll tax into a personal account. Can such accounts avoid the risk associated with the stock market? Twenty years ago, three Texas counties opted out of Social Security and they have never lost a dime. These counties provide a real, working model for personal accounts that are as safe as a bank.

One of President Bush’s most controversial campaign proposals was to let workers place a portion of their Social Security payroll tax into a personal account. Can such accounts avoid the risk associated with the stock market? Twenty years ago, three Texas counties opted out of Social Security and they have never lost a dime. These counties provide a real, working model for personal accounts that are as safe as a bank.

The Constitution originally forbade direct, invasive taxes. The Sixteenth Amendment removed this protection and gave birth to the modern income tax, sacrificing our individual liberties, our legal principles and protections to government’s insatiable desire for revenue. A primary criterion for tax reform should be the restoration of the individual liberties intended by the Founders.