Imagine an America with a Pro-Growth, Pro-Family Tax Code

The National Commission on Economic Growth and Tax Reform recommends to the Congress and to the President of the United States that the current Internal Revenue Code be repealed in its entirety.

The present system is beyond repair — it is impossibly complex, outrageously expensive, overly intrusive, economically destructive, and manifestly unfair.

It is time to replace this failed system with a new simplified tax system for the 21st century: a single low rate, taxing income only once with a generous personal exemption and full deductibility of the payroll tax for America’s working men and women.

This system will reduce the tax burden on middle-income people and will help remove the barriers that keep low-income Americans from reaching their fullest potential.

These changes, once in place, should be sealed with a guarantee of long-term stability, requiring a two-thirds vote of the U.S. Congress to raise the rate.

This new system is predicated on a commitment to expanding growth and opportunity. We believe the changes we propose will help double the rate of economic growth.

A stronger economy will create more jobs, raise family incomes, expand ownership and entrepreneurship, and ensure greater opportunity for our children and grandchildren. It will also produce additional revenues for balancing the budget and reducing the burden of national debt.

The principles and recommendations contained in this report comprise the “Tax Test” – the standard to which any new tax system must be held. We ask that Congress not pass nor the President sign any tax legislation that fails to pass this test. And we encourage the public to use the goals and guidelines we offer as a road map through the coming national debate on tax reform.

Our aim: to introduce a new system of taxation that brings out the best in the American character, that plays to our strengths and not our weaknesses, that speaks to our hopes and not our fears. Our recommendations are based on a vision of America that places the individual — not the government — at the center of society:

* We believe that government does not create opportunity; citizens do, if government will get out of their way.

* We believe that government is not the engine of economic growth; it is, more frequently, the monkey wrench in the machine.

* We believe that taxpayers’ earnings and savings — their property — are not assets on loan from the government. The government is power on loan from the people.

One of the most serious shortcomings of previous attempts at tax reform has been the inability of average Americans to make their voices heard above the chorus of special interests. We have tried a radically different approach: Listening to the people first.

In his first debate with Stephen Douglas, Abraham Lincoln remarked that “with public sentiment, nothing can fail; without it nothing can succeed.” We believe that any major legislative attempt to replace the current tax code will falter unless it is first preceded by a national debate on what the new system should look like.

Many previous attempts to reform public policy have failed to achieve their aims because they substituted closed meetings for democratic dialogue, focusing too much on expert analysis and too little on citizens’ concerns. By including the public in the deliberations over tax reform, this commission seeks to build broad-based consensus behind a new tax system for America’s next millennium.

It was with this spirit that the commission held cross-country public hearings — from the historic home of the Boston tea-party to the heart of south-central L.A. At every hearing in every city, we asked people to tell us what they saw as the problems with the current system and the goals any reform plan should achieve.

* In Omaha, farmers pleaded for simpler filing and the freedom to pass family farms on to their children without fear of federal confiscation.

* In the Silicon Valley, high-tech entrepreneurs told of the countless ideas conceived but never born because of a scarcity of investment capital.

* In south-central Los Angeles, small business-owners voiced frustrations at not being able to expand or hire new workers because of a tax bite that eats away their profits.

* And in Harlem, inner-city entrepreneurs expressed both bitterness and bewilderment at a tax code which sucked revenues out of their neighborhoods while preventing investment from flowing in.

In our nation’s capital, we heard from elected officials in both the House and the Senate who have for many years been leaders in tax reform. Because of their tireless public service, tax reform is a priority issue on the nation’s agenda.

We also heard from many of the finest economists in the country who shared their knowledge and research with us at every hearing.

After our hearings, we held a series of working sessions to analyze what we had heard and to begin discussing our recommendations for change. During one of our working sessions, the commissioners put aside the charts and graphs for a moment, stepped back, and tried to imagine what kind of world they would like America’s next generation to grow up in. We were asked to think about how replacing the tax code might help bring that world about:

* Imagine an America enjoying a decade of economic growth at nearly twice the present rate — creating jobs, expanding opportunities, and lifting living standards for all.

* Imagine an America in which more dreams born in basements and garages grow into multi-million dollar businesses because abundant capital seeks out good ideas, and entrepreneurs and investors are confident that their risk-taking will be rewarded, not punished.

* Imagine an America where it is easier to get a job than to get on welfare, and where our inner cities share in America’s growth and prosperity. Imagine these neighborhoods ringing out, not with sirens in the night, but with the sounds of new storefronts being opened and new businesses being built.

* Imagine an America where home ownership and higher education are within the reach of every American so that each citizen owns a stake in the system and shares a common interest and responsibility for its future.

* Imagine an America where young couples aren’t asked to take a tax hit in order to exchange their marriage vows, and where young families can save for their future without being punished for their thrift.

* Imagine an America where Americans have enough to give, not just to and through their government, but to their churches, synagogues, mosques, their charities, and neighbors in need.

* Imagine an America where the I.R.S. becomes the “TPA” — a Taxpayer Protection Agency — to ensure that no one pays more than is owed. Imagine a customer-friendly approach to raising revenue, based on a belief in the basic honesty of the American people, that treats them with dignity and respect.

We believe that replacing our tax system with one that is simpler and fairer can help to make these American dreams come true.

America was not founded on envy or resentment. The American idea was never to keep everyone at the same mean level, but to give everyone the chance to rise as high as his or her effort, initiative and God-given talent would allow. It was a promise of equal opportunity, not of end results: the confidence that whatever you aspired to become — be it artist, inventor, or entrepreneur — you could make it happen here.

As the country pursues this change, how we transition from the existing bankrupt system to the new system will be important. Complicated issues will arise. Nonetheless, we are confident that the Congress and the President will solve these transitions in order to bring about this new tax system. Dramatic change never is easy, and complicated issues will arise in the transition. But change we must, confident that, with the leadership of the Congress and the president, the American can-do spirit will prevail.

A new tax system, as envisioned in the following pages of this report, can take a first step toward renewing that sense of hope and possibility by unleashing a cascade of benefits, beginning with greater economic growth, lower interest rates, and expanded job opportunities for working Americans.

In this spirit, we invite the American people and their elected leaders from both political parties to use the Tax Test as a checklist as they move forward in replacing the current tax code. We urge the Congress and the President to base any new legislation on the principles and recommendations submitted in this report. Furthermore, we urge President Clinton to appoint a presidential task force or commission to bring the recommendations offered by this congressionally appointed commission to the next level of public debate.