“They act like all that money is born in Washington, D.C.” Perhaps no comment has better summarized the problem with our nation’s capital than this observation by Ed Zorinsky, the late Democratic Senator from Nebraska. And nowhere is this governmental conceit expressed more destructively than in the workings and effects of our Internal Revenue Code.
Many previous attempts at tax reform have been marred by the inside-the-beltway assumption that the wealth of the nation belongs to its government. This position has perpetuated what could be called the “tin-cup syndrome” – an environment in which the political competition over scarce resources replaces the economic competition that produces growth, creates jobs, spurs innovation and productivity. As a consequence, the tax code has over the years become increasingly politicized, and is seen less as a simple tool for raising revenue than as an instrument for social and economic engineering. In turn, this has spawned a virtual industry of tax specialists and special interest lobbyists, while exponentially increasing the complexity of the code.
The National Commission on Economic Growth and Tax Reform set out with a different set of assumptions, beginning with the belief that the purpose of the tax code is to raise money while leaving citizens as free as possible to pursue the American dream. Our charge from Senate Leader Dole and Speaker Gingrich was clear: Listen first and learn from the American people. We listened to ordinary taxpayers in hearings around the country. What we heard was a great deal of frustration, concern, and, yes, anger with the current system. Our hope has been to channel those frustrations into a set of concrete principles and recommendations that any new tax reform legislation must follow if it is to meet the needs and expectations of the American people.
From June until September 1995, we heard from a cross-section of American taxpayers in Boston, Omaha, Charlotte, Palo Alto, south-central Los Angeles, Harlem, Cleveland, and Washington, D.C. We listened to and learned from family farmers and high-tech entrepreneurs, small businessmen and women, medium-sized and large manufacturers, governors and mayors, congressmen and senators, leading economists and local activists.
Unlike previous “reform” commissions, our activities were financed without a dime from the American taxpayer. Expenses were met through private contributions from more than 1,500 donors. The fourteen commissioners received no compensation for the long hours and hard work, save the tremendous reward of knowing their sacrifices would help shape American history. This is an extraordinary group of American citizens who have demonstrated through untold hours of hearings, deliberations, and study their dedication to chart a course that will lead to a better America for their children and grandchildren. We believe we have set that course.
In 1941, in a famous essay for Life magazine, Henry Luce anticipated that the 20th century would be remembered as the American Century. The decades and events that followed – the defeat of Nazi Germany, the collapse of Communism, the expansion of American influence abroad – bore this prediction out. Today, many Americans fear they see that era of American preeminence slipping away. The optimism and boundlessness that have always defined America are seen by some as fond but faded relics to be quietly folded away.
This report reflects the firm conviction that America can do better. None of the members of this commission would have accepted this challenge if we did not believe in the possibility of real progress and real reform.
Albert Einstein observed that “the problems of today cannot be solved at the same level of thinking on which they were created.” We have concluded that the complex tax code of the 20th century is poorly suited for dealing with the complex world of the 21st. The vision outlined in the following pages cannot be realized by simply rearranging the deck chairs on the Titanic we call our current tax code. A brand new tax code, modeled on the principles and recommendations proposed in this report, can chart the economic waters ahead and launch our country on its voyage toward the next American century.
Edwin J. Feulner
National Commission on Economic Growth and Tax Reform