Rather than just talk about the Fair Tax, let’s talk about major tax reform. Here’s an article to kick-start the discussion.
The simplification effort should extend beyond paring tax expenditures from the code or standardizing overlapping provisions that create confusion. Rewriting the tax code also needs to assure that similar kinds of economic activity are treated consistently, eliminating incentives to select differing organizational forms based on tax, rather than economic conditions. Fortunately, the discussion has evolved over the last two years and is no longer dominated by big corporations clamoring for lower statutory rates and repatriation of overseas earnings. The tax writers, particularly Mr. Camp, have recognized that reform needs to encompass both individual and business code provisions in order to achieve fairness and minimize tax avoidance. I would further suggest a thorough examination of what is tax exempt, an issue I don’t see getting any attention. Recent months have seen vocal advocacy of a robust charitable deduction. Fair enough. A far bigger issue is establishing the proper line between what is deemed for profit or not-for-profit under the code. As a leader at one prominent Indiana tax-exempt organization said to me recently, “Not-for-profit is just a tax status, not a way of doing business.” The continuing drift towards tax exemption can only lead to erosion of the revenue base at a time when we need the money.