April heralds two markers in Americans’ financial calendar. Neither brings joy. Their anguish reminds us of the dire need for fiscal reform before it’s too late.
The first day is Tax Day on April 15, when you must file taxes to the IRS. The other day is Tax Freedom Day on April 16. The latter is the 104th day of the year, which represents when Americans, on average, can stop working to pay taxes and start working to improve their own lives and further their economic goals. We work 30 percent of our days to pay government alone.
This stark division of the year into earning to pay for the government versus for oneself casts a revealing light on taxation’s burden. These dismal dates indicate an urgent need to overhaul the fiscal regime of excessive government spending that drives taxes higher.
The pain and uncertainty from an ever-changing federal progressive marginal individual income tax system with forced withholding and payment or refund later are destructive. These costs distort our ability to prosper.
Central to minimizing these burdens and distortions is for the federal government to spend less, thereby reducing the amount needed from taxes. And the tax system should be simplified by moving to a broad-based, flat-income tax. Eventually, we could eliminate income taxes and fund our significantly reduced spending with a broad-based, flat final sales tax, but politics too often takes precedence over prudence.
States without personal income taxes, such as Texas and Florida, often showcase stronger economic performance, underscoring the potential benefits of a consumption-based tax model. The Tax Foundation’s analysis shows that these states enjoy higher growth rates and attract businesses and residents alike, advocating for the efficiency of a less burdensome tax system.
Unlike taxes on income, a consumption tax better aligns with economic volatility and taxpayers’ decisions. It introduces a transparent, simpler tax system, starkly contrasting the current convoluted income tax code, thereby supporting more freedom to choose, increased savings, and faster economic growth.
But the looming uncertainty inevitably generated by temporary tax measures and seemingly endless, excessive government spending demands attention.
For instance, the individual income tax rate reductions, full-expensing, and other provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 expire over the next year, creating a cloud of uncertainty. Moreover, the multi-trillion-dollar deficits from overspending result in further economic destruction because of higher interest rates and less investment.
The economic impact was notable, with the Congressional Budget Office reporting a surge in GDP growth following the TCJA’s implementation. But the uncertainty surrounding its future dampens long-term economic prospects and investments. Permanent tax reform, aimed at fostering stability and growth, requires a commitment to fiscal discipline and a reevaluation of government spending priorities.
The erratic nature of such spending and tax policies erodes the stability crucial for economic prosperity. Uncertainty, particularly around taxes, inhibits investment and innovation. Predictability is key to strategic planning and growth. For entrepreneurs, uncertainty is a strong disincentive. The fluctuating tax landscape presents a significant barrier to economic expansion.
Addressing this uncertainty requires permanent growth-oriented tax policies and controlling government spending.
The direction of tax reform must be twofold: advocating for broad-based, flat taxes and championing sustainable government budgets. This dual approach promises to enhance economic liberty and lay a foundation for robust growth, which should also reduce the number of days to Tax Freedom Day so more money is in our pockets.
Reflecting on Tax Day and Tax Freedom Day sparks a broader discussion on tax reform. We can envision a society that values freedom, peace, and prosperity by championing pro-growth policies of a simplified, flat tax system and sustainable spending.
Dispelling tax uncertainties and controlling government spending pave the way for economic policies that foster rather than hinder human flourishing.
The journey toward a more rational tax system is not merely fiscal; it’s a moral imperative. It demands bold, persuasive advocacy for policies that champion economic soundness while embracing the principles of liberty and opportunity.
We can inspire a movement toward genuine economic reform on this Tax Day by addressing the challenges posed by the current tax code and advocating for a shift toward a better fiscal regime with more days working for ourselves instead of Uncle Sam.