Proposal for a Better Tax Code

As part of House Speaker Paul Ryan’s “Better Way” series of policy proposals, Republican working groups have identified two major problems with the way our tax system currently works. First and foremost, our tax code is far too complicated. Second, the Internal Revenue Service (IRS) has lost sight of its mission, helping America's taxpayers understand and meet their tax responsibilities and enforcing the law with integrity and fairness.

To address the first problem, the “Better Way” tax proposal would reduce the number of income tax brackets from seven to three. Additionally, the standard deduction would be streamlined and increased to a maximum of $24,000 for married couples filing jointly. The current child exemptions and child tax credit would be consolidated into a total child tax credit of up to $1,500. As a result of these changes and simplifications, many families who currently itemize their deductions could instead complete their taxes on a form about the size of a postcard. Think about that: a postcard-size form instead of pages and pages to complete even the simplest individual tax return.

Speaker Ryan’s plan extends the advantages of a simpler system beyond individual income taxes. Specifically, for small businesses, the plan would cap taxes at 25 percent for sole proprietorships and partnerships. This new rate structure would allow small businesses to grow, invest, and create new jobs in their communities while ensuring they are not taxed more than large corporations. Notably, Republican working groups also called for the elimination of the estate tax, which is one of the biggest threats to farming families hoping to hand down their land to the next generation. Finally, this proposal also advocates lowering the corporate tax rate from 35 percent, the highest in the developed world, to just 20 percent. A lower corporate tax rate will increase the likelihood of companies keeping their headquarters and jobs in the United States instead of moving overseas.

The internal problems of the IRS are harder to address concretely from the Congressional standpoint because many of the problems stem from the culture of the agency itself. However, working groups identified some specific proposals to help shift the internal IRS culture and put taxpayers first. One of the best ways to protect taxpayers is to ensure the IRS is upholding the Taxpayer Bill of Rights. Furthermore, updating and prioritizing the security of the IRS systems that handle sensitive taxpayer information is vital.

The most direct proposal to change the culture of the IRS is to simply streamline customer service into specialized units based on the type of service provided, rather than the current overarching customer service department, which serves all IRS divisions. Changing the IRS’ internal problems has already been a focus for Congress this year, with the House passing four bills to address some of the most serious issues. This includes H.R. 1206, No Hires for the Delinquent IRS Act, which would prevent the IRS from hiring people who are delinquent on their taxes.

Our complex tax code and the IRS’ notoriously poor customer service have come to make Americans dread each approaching tax season. It is time to find a better way to approach taxation, one that works with the American economy and the American people, not against them.