As a federal lawmaker licensed to steer tax and spending policy through the legislative branch of the federal government, I use my leadership assignments on the tax- and budget-writing committees to keep close tabs on hard-earned tax dollars sent in to the federal treasury.
Although ordinary household budgets pale in comparison to the sheer size of the $2.8 trillion federal budget, it is very ordinary for lawmakers to squabble over spending decisions like many heads of households acrossAmerica.
Just like so many households struggle with credit card debt, Congress too spends beyond its means. NowWashingtonstruggles to curb deficit spending due in large measure to obligations necessary to supportU.S.troops fighting the war on terror and to rebuild hurricane devastation in theGulf
The President sent to Congress in February a spending plan for the coming fiscal year. As millions of taxpayers test their mettle against the federal tax code during tax season, lawmakers will test their convictions to balance the federal budget.
It all boils down to balancing the revenue coming in with revenue going out. It sounds like a no-brainer. The new Congress recently reinstated so-called “pay-go” budgeting rules. It essentially puts teeth in the lofty principle so many spouses and lawmakers struggle to achieve: to spend within one’s means. The re-imposed budgeting rules will require new tax cuts or spending proposals to match revenue dollar for dollar. So any tax cuts or spending increases would need to be accompanied by an offset, i.e., a tax increase or spending cut elsewhere in the budget.
Although some big-spenders in Congress say we ought to roll back tax relief, the truth is that Congress can’t raise taxes high enough to satisfy the appetite of Congress to spend money.
What’s more, the historic 2001 and 2003 tax cuts I helped drive through Congress have helped put theUnited Stateson a five-years and going economic expansion.
Looking ahead, one element of the federal tax code that’s ripe for the permanent chopping block does exist. If only solving the problem were as easy as identifying it. The Alternative Minimum Tax (AMT) soon will cause tens of millions of taxpayers – including 17,047 individuals and families inIowa-- to pay more in federal taxes than they otherwise would under the standard federal tax code. A parallel tax system first enacted decades ago to help ensure the very wealthiest taxpayers didn’t evade income taxes, the AMT now threatens to force middle-income families with children to foot a significantly higher tax bill.
I’m also working to put a plug in a gaping revenue hole the I.R.S. identifies as the “tax gap.” The federal tax-collecting agency estimates the government loses approximately $345 billion every year from taxpayers who either underreport income or underpay taxes. Time will tell if the reality is anywhere near that estimate, but whatever is not paid by those unfairly exploiting the system, means that honest taxpayers are stuck paying more.
The tax gap isn’t a new problem, and I paid top IRS officials a visit recently to brainstorm ideas to recover revenue lost in the tax gap. Timely, voluntary compliance has ranged from around 81 percent to 84 percent in the last three decades. There’s no simple solution for solving the tax gap, and it’s clear that more money for the IRS isn’t the answer.
Even so, improving compliance would make the entire system better for honest taxpayers fulfilling their civic duty this tax season. It would also increase the odds for Congress to solve other problems vexing taxpayers, such as erasing the AMT headache before next tax season.