Reforming the Tax Code

The tax code has become increasingly complicated and unfair. Under today’s tax laws, those who can afford expert advice can avoid paying their fair share and interests with the most connected lobbyists can get exemptions and special treatment written into our tax code.  While many of the tax incentives serve important purposes, taken together the tax expenditures in the law are inefficient, unfair, duplicative, or even unnecessary.  In fact, because our corporate tax system is so riddled with special interest loopholes, our system has one of the highest statutory tax rates among developed countries to generate about the same amount of corporate tax revenue as our developed country partners as a share of our economy; this, in turn, hurts our competitiveness in the world economy.

That is why the President is calling on the Congress to enact comprehensive tax reform that meets the following five principles:

To begin the national conversation about tax reform, the President has offered a detailed set of tax loophole closers and measures to broaden the tax base that. These measures include: cutting tax preferences for high-income households; eliminating special tax breaks for oil and gas companies; closing the carried interest loophole for investment fund managers; and eliminating benefits for those who buy corporate jets.

Tax reform should draw on these items, together with the elimination of additional inefficient tax breaks, to finance the reduction of marginal rates and meet the President’s other tax principles, including the Buffett Rule.  In the absence of fundamental tax reform, the President believes these measures should be enacted on a standalone basis, along with permanent extension of the middle class 2001 and 2003 tax cuts.  This would be an important step toward a tax system that is consistent with the President’s principles.

1. Lower tax rates.
   The tax system should be simplified and work for all Americans with lower individual and corporate tax rates and fewer brackets.
2. Cut inefficient and unfair tax breaks.
   Cut tax breaks that are inefficient, unfair, or both so that the American people and businesses spend less time and less money each year filing taxes and cannot avoid their responsibility by gaming the system.
3. Cut the deficit.
   Cut the deficit by $1.5 trillion over the next decade through tax reform, including the expiration of tax cuts for single taxpayers making over $200,000 and married couples making over $250,000.
4. Increase job creation and growth in the United States.
   Make America stronger at home and more competitive globally by increasing the incentive to work and invest in the United States.
5. Observe the Buffett Rule.
   As multi-billionaire Warren Buffet has pointed out, his average tax rate is lower than his secretary’s. No household making over $1 million annually should pay a smaller share of their total income in taxes than middle-class families. This rule will be achieved as part of overall reform that increases the progressivity of the tax code. Learn more about the Buffett Rule.