Both lowering taxes and reforming the tax code are an important economic initiatives. The tax code today is a very inefficient collector of government revenue and provides odd incentives through the code. Many “incentives”, like the charitable deduction, only apply if you itemize and most people do not.
The most perverse incentive is the SALT deduction — allowing people to reduce their Federal tax burden by the amount they pay to their States. This creates the absolute incentive for States to raise taxes with zero consequence. Raise the State tax, and the Federal government gets less but the taxpayer pays no more. A couple making $90,000 per year living in Texas or Florida, with no State income tax, pays all of their tax burden to the Federal Government. Another couple earning the same amount but living in high income tax states like NY or California, would pay the same total amount but provide much less to the Federal coffers. Yet the Federal government hands out services equally to the high and low costs States. The local State governments are getting a total “free pass” on their bloated and inefficient spending, and everyone’s Federal rates are affected by this.
In the airline business, it is very clear that even very small changes in price drive big changes in demand. By letting people keep more of what they earn, no matter where they live, our economy will be better off and the only ones hurt will be the government beuracrats who have been living in a fantasy world, where they can easily spend other peoples’ money to keep their government expanding.
The challenge to legislators should be to produce a tax plan that really does reduce total taxes for everyone except possibly the most wealthy, including those in high tax States, but not continue to support the inefficient incentives in the current code. The simpler the code, and the more loopholes removed, the more efficient the collection will be, the more accurate, and the amount of time wasted trying to optimize or even just file existing taxes will go away. Our governments should first have to prove that they spend our money wisely before asking for more of it.