2. Simplify the tax code
While the United States has the highest statutory corporate tax rate of all developed countries, many companies escape taxes. The reason? The code has morphed into an infinitely complex tool of social engineering. Itâ€™s riddled with loopholes and exemptions. It is not surprising that special interests regularly exploit its complexities to carve out favors. Who can forget when it emerged in early March that General Electric completely avoided federal taxes in 2010?
The tax codeâ€™s complexity is a major drag on the American economy. Individuals and businesses spend enormous sums just to comply. Thatâ€™s money that could be going toward productive investments.
Research from the Laffer Center finds that for every dollar collected by the IRS, taxpayers pay another 30 cents for compliance, with total tax compliance expenses sucking $431 billion from the American economy annually.
The quickest way to simplify the tax code would be to install a flat tax â€“ one rate for personal income, another for businesses. Doing so would cut down on waste and favoritism. Hong Kong has had a 15 percent flat income tax since 1947, and itâ€™s one of the most prosperous cities in the world. There is a lesson to be learned here.