The United State income tax code does more than just collect taxes to run our government. It is also there to incentivize certain behavior. The tax code provides specific tax benefits related to research, owning a home or energy efficient home improvements - just to name a few. If we move to a ‘flat tax,’ as proposed by some of the presidential hopefuls – there will be segments of our economy that will really suffer. If we lose the mortgage interest deduction, that will further cripple the real estate industry (think more people out of work and a drop in home prices). Cutting back on the research tax credit may cause that work to be shifted overseas or a loss of innovation in our country. The loss of charitable deductions would hurt non-profits and the individuals that they serve.
We currently have a very delicate economy facing numerous ‘head winds.’ While simplification of the tax code or a flat tax might sound good, I would rather see our leaders look to change the tax code during a period of prosperity. Going to a flat tax at this point, would just further hinder our economic recovery.
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