Monday, October 23, 2023

Colorado's final wolf reintroduction plan has been approved

 

Colorado's final wolf reintroduction plan has been approved. Here are the highlights.

Miles Blumhardt
Fort Collins Coloradoan

The Colorado Wolf Restoration and Management plan has been approved after nearly two years of exhaustive work.

The Colorado Wildlife Commission unanimously approved the final plan at its May 3 meeting in Glenwood Springs.

The plan was developed with the help of two advisory groups made up of wildlife professionals and varied stakeholders, through a series of public meetings and more than 4,000 comments.

What states will reintroduced wolves come from, how many wolves will be released and where will wolves be released?

  • Idaho, Montana and Wyoming are the desired states, with other possible donor states including Oregon and Washington, though a 9News story says source states are unwilling or have had little to no communication with Colorado regarding the issue.
  • 10 to 15 wolves will be released per year, for a total of 30 to 50 wolves over the next three years depending on recovery success.
  • Initial release site has been identified in an area with Glenwood Springs on the west, Kremmling on the north, Vail on the east and Aspen on the south. The area includes Interstate 70 running through the middle. The release sites would be focused on state and private land where there are willing owners.

How we got here:What to know about Colorado's existing wolves and conflicts around reintroduction plan

How many wolves will need to be established for wolves to be downlisted from endangered to threatened to delisted?

  • Downlisting from state endangered to state threatened will occur when a minimum count of 50 wolves anywhere in the state for four successive years is met.
  • Delisting from threatened to nongame status will occur when a minimum count of at least 150 wolves anywhere in Colorado is observed for two successive years, or a minimum count of at least 200 wolves at any time with a geographical distribution component through a finding that the species "is present in a significant portion of its range."
In this file photo, volunteers from a nearby ranch and a U.S. Department of Agriculture Wildlife Services staff member erect electric fencing with flags meant to deter wolves from cattle along a small pasture on the Gittleson Angus ranch northeast of Walden in January 2022. The ranch had cows killed by Colorado’s existing wolfpack.

Will wolves be allowed to be killed in certain situations?

  • Currently, wolves are listed as federally endangered in Colorado and can only be legally killed if threatening human life.
  • Colorado requested a 10(j) ruling under the Endangered Species Act and is awaiting a determination by the federal government. The state is hoping for a resolution by Dec. 15, just two weeks before state officials wish to release wolves by the end of the year. The 10(j) rule lists wolves as "experimental" and would allow more flexibility managing them, including lethal take of wolves in situations such as chronic depredation or wolves caught depredating livestock.
  • Colorado Senate Bill 23-256 introduced in this year's legislature originally precluded reintroduction until a determination of the 10(j) rule is finalized. An amendment to the original bill deleted this part of the bill over concern it would likely delay reintroduction. The bill is in the House or Representatives awaiting further debate. The legislative season ends May 6.

More: Colorado wolvesNorth Park wolfpack member confirmed to have wandered into Grand County

Will a hunting season of wolves be allowed when wolves are delisted?

  • Proposition 114, narrowly approved by voters, designated wolves as nongame, meaning the animals cannot be hunted, but the commission could have the power to change that.
  • The original plan included a Phase 4 that looked at the possibility of a hunting season when wolves are delisted. That has been removed and now basically defers actions regarding a hunting season to be assessed by future Colorado Wildlife Commissions.

 

Gun-Grabbers Break Out These 4 Common Myths Every Time There's a Shooting

 

Op-Ed: Gun-Grabbers Break Out These 4 Common Myths Every Time There's a Shooting

The deadly shooting that took place last Saturday at a mall in Allen, Texas, was just one of a recent string of mass shootings in the United States. Eight victims lost their lives.

With this type of violence, debates about the Constitution are always brought forward. The Second Amendment is under attack probably more than any other amendment in our Bill of Rights.

The Second Amendment states: “A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.”

In response to this most recent mass shooting, anti-gun advocates are once again demanding more gun restrictions.

Here are four common myths surrounding the Second Amendment and gun control.

Trending:
CNN Humiliated On Air as Migrant Destroys Left's Border Narrative, Network Abruptly Ends Interview

1. A “well-regulated militia” means gun regulations.

Anti-gun advocates frequently cite the “well-regulated militia” clause. They often believe this refers to gun restrictions or needing to be part of a militia to own firearms.

But upon further analysis, this is not the case. A “well-regulated militia” simply refers to the American people.

“The militia system, with deep roots in English history, was one way of ensuring that the nation could defend itself against all threats, foreign and domestic. Instead of a large full-time professional army, the government could, when needed, call upon the greater body of armed citizens to employ their personal firearms in the collective defense of the state or nation,” as The Heritage Foundation highlighted.

“A ‘well-regulated’ militia simply meant that the processes for activating, training, and deploying the militia in official service should be efficient and orderly, and that the militia itself should be capable of competently executing battlefield operations.”

The 2008 Supreme Court ruling in District of Columbia v. Heller also confirmed that the Second Amendment protects an individual right. Being part of a militia is not required to exercise that right.

2. The right to “keep and bear arms” does not apply to modern weaponry.

The left often claims we do not have a right to own AR-15s and “assault rifles” because they did not exist at the time the Founding Fathers drafted and ratified the Second Amendment.

But this makes little sense. It is analogous to saying free speech rights are not included on the internet or other modern forms of communication because they did not exist at the time the First Amendment was written.

Related:
Op-Ed: The 5 Biggest Lies from Biden's State of the Union Address

The Founders were brilliant to use the term “arms” since it is a very generic term that includes many forms of firearms. If they specifically intended the amendment to protect the right to keep and bear muskets, all of the handguns and rifles we use today would be in legal jeopardy.

Rep. Jim Jordan highlighted this key distinction in a hearing earlier this year.

3. Gun control is the only action needed to prevent gun violence.

Gun control advocates say we need to “take action” or “do something” to address gun violence. But their definition of action is always more gun control on top of existing gun control that failed to prevent these shootings.

Despite the calls for more restrictions, it appears that the mall where the Texas shooting took place was already a gun-free zone.

This shows that criminals never obey existing gun laws and, as a result, the only ones who suffer are law-abiding citizens being unable to defend themselves.

More gun control is not the answer. Part of the solution is to eliminate gun-free zones to allow law-abiding citizens to carry a firearm and increase their chances of repelling a potential shooter in the first place.

4. Ted Cruz and Greg Abbott were responsible for the Texas mall shooting.

Unfortunately, we live in a time when gun control advocates blame political opponents when these deadly shootings take place.

Texas Sen. Ted Cruz and Gov. Greg Abbott were among those targeted by this type of rhetoric.

Politicians like California Rep. Eric Swalwell wasted no time smearing Cruz and claiming that he sides with the murderers over the victims.

Journalist Steven Beschloss was just one of many who said Abbott had blood on his hands.

Second Amendment advocates are not responsible for any shooting. The blame must be placed on the killers themselves.

If we are going to reduce gun violence, we need to repeal ineffective gun control laws and bring back a culture that instills good faith and morals.

Friday, October 13, 2023

Don’t Miss The Most Damning Durham Finding

Don’t Miss The Most Damning Durham Finding

Special Counsel John Durham declared the DOJ and FBI’s hearts and minds corrupted.

 

Thursday, May 18, 2023

Let’s Compare Media’s Lies About The Durham Report With What The Report Actually Said

 

Let’s Compare Media’s Lies About The Durham Report With What The Report Actually Said

John Durham
Image CreditMSNBC/YouTube

It’s not as if John Durham is hiding the ball. He notes there were equal opportunities to investigate Clinton’s campaign in 2016, but those were handled more discreetly.

Monday, May 15, 2023

Op-Ed: Gun-Grabbers Break Out These 4 Common Myths Every Time There's a Shooting

 

Op-Ed: Gun-Grabbers Break Out These 4 Common Myths Every Time There's a Shooting

The deadly shooting that took place last Saturday at a mall in Allen, Texas, was just one of a recent string of mass shootings in the United States. Eight victims lost their lives.

With this type of violence, debates about the Constitution are always brought forward. The Second Amendment is under attack probably more than any other amendment in our Bill of Rights.

The Second Amendment states: “A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.”

In response to this most recent mass shooting, anti-gun advocates are once again demanding more gun restrictions.

Here are four common myths surrounding the Second Amendment and gun control.

Trending:
CNN Humiliated On Air as Migrant Destroys Left's Border Narrative, Network Abruptly Ends Interview

1. A “well-regulated militia” means gun regulations.

Anti-gun advocates frequently cite the “well-regulated militia” clause. They often believe this refers to gun restrictions or needing to be part of a militia to own firearms.

But upon further analysis, this is not the case. A “well-regulated militia” simply refers to the American people.

“The militia system, with deep roots in English history, was one way of ensuring that the nation could defend itself against all threats, foreign and domestic. Instead of a large full-time professional army, the government could, when needed, call upon the greater body of armed citizens to employ their personal firearms in the collective defense of the state or nation,” as The Heritage Foundation highlighted.

“A ‘well-regulated’ militia simply meant that the processes for activating, training, and deploying the militia in official service should be efficient and orderly, and that the militia itself should be capable of competently executing battlefield operations.”

The 2008 Supreme Court ruling in District of Columbia v. Heller also confirmed that the Second Amendment protects an individual right. Being part of a militia is not required to exercise that right.

2. The right to “keep and bear arms” does not apply to modern weaponry.

The left often claims we do not have a right to own AR-15s and “assault rifles” because they did not exist at the time the Founding Fathers drafted and ratified the Second Amendment.

But this makes little sense. It is analogous to saying free speech rights are not included on the internet or other modern forms of communication because they did not exist at the time the First Amendment was written.

Related:
Op-Ed: The 5 Biggest Lies from Biden's State of the Union Address

The Founders were brilliant to use the term “arms” since it is a very generic term that includes many forms of firearms. If they specifically intended the amendment to protect the right to keep and bear muskets, all of the handguns and rifles we use today would be in legal jeopardy.

Rep. Jim Jordan highlighted this key distinction in a hearing earlier this year.

3. Gun control is the only action needed to prevent gun violence.

Gun control advocates say we need to “take action” or “do something” to address gun violence. But their definition of action is always more gun control on top of existing gun control that failed to prevent these shootings.

Despite the calls for more restrictions, it appears that the mall where the Texas shooting took place was already a gun-free zone.

This shows that criminals never obey existing gun laws and, as a result, the only ones who suffer are law-abiding citizens being unable to defend themselves.

More gun control is not the answer. Part of the solution is to eliminate gun-free zones to allow law-abiding citizens to carry a firearm and increase their chances of repelling a potential shooter in the first place.

4. Ted Cruz and Greg Abbott were responsible for the Texas mall shooting.

Unfortunately, we live in a time when gun control advocates blame political opponents when these deadly shootings take place.

Texas Sen. Ted Cruz and Gov. Greg Abbott were among those targeted by this type of rhetoric.

Politicians like California Rep. Eric Swalwell wasted no time smearing Cruz and claiming that he sides with the murderers over the victims.

Journalist Steven Beschloss was just one of many who said Abbott had blood on his hands.

Second Amendment advocates are not responsible for any shooting. The blame must be placed on the killers themselves.

If we are going to reduce gun violence, we need to repeal ineffective gun control laws and bring back a culture that instills good faith and morals.

Monday, May 1, 2023

SB23-213 Land Use

 

SB23-213

Land Use

Concerning state land use requirements, and, in connection therewith, establishing a process to diagnose and address housing needs across the state, prohibiting a local government from enforcing certain occupancy limits, modifying the content requirements for county and municipal master plans, criteria for certain grant programs, and expenditures from the multimodal transportation options fund to align with state strategic growth objectives, and making an appropriation.
Session:
2023 Regular Session
Subjects:
Housing
Local Government
Bill Summary

Housing needs planning. The executive director of the department of local affairs (director) shall, no later than December 31, 2024, and every 5 years thereafter, issue methodology for developing statewide, regional, and local housing needs assessments. The statewide housing needs assessment must determine existing statewide housing stock and current and future housing needs. The regional housing needs assessments must allocate the addressing of housing needs identified in the statewide housing needs assessment to regions of the state. Similarly, the local housing needs assessments must allocate the addressing of the housing needs allocated in the regional housing needs assessment to localities in the relevant region.

The director shall, no later than December 31, 2024, issue guidance on creating a housing needs plan for both a rural resort job center municipality and an urban municipality. Following this guidance, no later than December 31, 2026, and every 5 years thereafter, a rural resort job center municipality and an urban municipality shall develop a housing needs plan and submit that plan to the department of local affairs (department). A housing needs plan must include, among other things, descriptions of how the plan was created, how the municipality will address the housing needs it was assigned in the local housing needs assessment, affordability strategies the municipality has selected to address its local housing needs assessment, an assessment of displacement risk and any strategies selected to address identified risks, and how the locality will comply with other housing requirements in this bill.

The director shall, no later than December 31, 2024, develop and publish a menu of affordability strategies to address housing production, preservation, and affordability. Rural resort job center municipalities and urban municipalities shall identify at least 2 of these strategies that they intend to implement in their housing plan, and urban municipalities with a transit-oriented area must identify at least 3.

The director shall, no later than December 31, 2024, develop and publish a menu of displacement mitigation measures. This menu must, among other things, provide guidance for how to identify areas at the highest risk for displacement and identify displacement mitigation measures that a locality may adopt. An urban municipality must identify which of these measures it intends to implement in its housing plan to address any areas it identifies as at an elevated risk for displacement.

The director shall, no later than March 31, 2024, publish a report that identifies strategic growth objectives that will incentivize growth in transit-oriented areas and infill areas and guide growth at the edges of urban areas. The multi-agency advisory committee shall, no later than March 31, 2024, submit a report to the general assembly concerning the strategic growth objectives.

The bill establishes a multi-agency advisory committee and requires that committee to conduct a public comment and hearing process on and provide recommendations to the director on:

  • Methodologies for developing statewide, regional, and local housing needs assessments;
  • Guidance for creating housing needs plans;
  • Developing a menu of affordability strategies;
  • Developing a menu of displacement mitigation measures;
  • Identifying strategic growth objectives; and
  • Developing reporting guidance and templates.

A county or municipality within a rural resort region shall participate in a regional housing needs planning process. This process must encourage participating counties and municipalities to identify strategies that, either individually or through intergovernmental agreements, address the housing needs assigned to them. A report on this process must be submitted to the department. Further, within 6 months of completing this process, a rural resort job center municipality shall submit a local housing needs plan to the department. Once a year, both rural resort job centers and urban municipalities shall report to the department on certain housing data.

A multi-agency group created in the bill and the division of local government within the department shall provide assistance to localities in complying with the requirements of this bill. This assistance must include technical assistance and a grant program.

Accessory dwelling units. The director shall promulgate an accessory dwelling unit model code that, among other things, requires accessory dwelling units to be allowed as a use by right in any part of a municipality where the municipality allows single-unit detached dwellings as a use by right. The committee shall provide recommendations to the director for promulgating this model code. In developing these recommendations, the committee shall conduct a public comment and hearing process.

Even if a municipality does not adopt the accessory dwelling unit model code, the municipality shall adhere to accessory dwelling unit minimum standards established in the bill and by the department. These minimum standards, among other things, must require a municipality to:

  • Allow accessory dwelling units as a use by right in any part of the municipality where the municipality allows single-unit detached dwellings as a use by right;
  • Only adopt or enforce local laws concerning accessory dwelling units that use objective standards and procedures;
  • Not adopt, enact, or enforce local laws concerning accessory dwelling units that are more restrictive than local laws concerning single-unit detached dwellings; and
  • Not apply standards that make the permitting, siting, or construction of accessory dwelling units infeasible.

Middle housing. The director shall promulgate a middle housing model code that, among other things, requires middle housing to be allowed as a use by right in any part of a rural resort job center municipality or a tier one urban municipality where the municipality allows single-unit detached dwellings as a use by right. The committee shall provide recommendations to the director for promulgating this model code. In developing these recommendations, the committee shall conduct a public comment and hearing process.

Even if a rural resort job center municipality or a tier one urban municipality does not adopt the middle housing model code, the municipality shall adhere to middle housing minimum standards established in the bill and by the department. These minimum standards, among other things, must require a municipality to:

  • Allow middle housing as a use by right in certain areas;
  • Only adopt or enforce local laws concerning middle housing that use objective standards and procedures;
  • Allow properties on which middle housing is allowed to be split by right using objective standards and procedures;
  • Not adopt, enact, or enforce local laws concerning middle housing that are more restrictive than local laws concerning single-unit detached dwellings; and
  • Not apply standards that make the permitting, siting, or construction of middle housing infeasible.

Transit-oriented areas. The director shall promulgate a transit-oriented area model code that, among other things, imposes minimum residential density limits for multifamily residential housing and mixed-income multifamily residential housing and allows these developments as a use by right in the transit-oriented areas of tier one urban municipalities. The committee shall provide recommendations to the director for promulgating this model code. In developing these recommendations, the committee shall conduct a public comment and hearing process.

Even if a tier one urban municipality does not adopt the transit-oriented model code, the municipality shall adhere to middle housing minimum standards established in the bill and by the department. These minimum standards, among other things, must require a municipality to:

  • Create a zoning district within a transit-oriented area in which multifamily housing meets a minimum residential density limit and is allowed as a use by right; and
  • Not apply standards that make the permitting, siting, or construction of multifamily housing in transit-oriented areas infeasible.

Key corridors. The director shall promulgate a key corridor model code that applies to key corridors in rural resort job center municipalities and tier one urban municipalities. The model code must, among other things, include requirements for:

  • The percentage of units in mixed-income multifamily residential housing that must be reserved for low- and moderate-income households;
  • Minimum residential density limits for multifamily residential housing; and
  • Mixed-income multifamily residential housing that must be allowed as a use by right in key corridors.

The committee shall provide recommendations to the director for promulgating this model code. In developing these recommendations, the committee shall conduct a public comment and hearing process.

Even if a rural resort job center municipality or a tier one urban municipality does not adopt the key corridor model code, the municipality shall adhere to key corridor minimum standards promulgated by the director and developed by the department. These minimum standards, among other things, must identify a net residential zoning capacity for a municipality and must require a municipality to:

  • Allow multifamily residential housing within key corridors that meets the net residential zoning capacity as a use by right;
  • Not apply standards that make the permitting, siting, or construction of multifamily housing in certain areas infeasible; and
  • Not adopt, enact, or enforce local laws that make satisfying the required minimum residential density limits infeasible.

The committee shall provide recommendations to the director on promulgating these minimum standards. In developing these recommendations, the committee shall conduct a public comment and hearing process.

Adoption of model codes and minimum standards. A relevant municipality shall adopt either the model code or local laws that satisfy the minimum standards concerning accessory dwelling units, middle housing, transit-oriented areas, and key corridors. Furthermore, a municipality shall submit a report to the department demonstrating that it has done so. If a municipality fails to adopt either the model code or local laws that satisfy the minimum standards by a specified deadline, the relevant model code immediately goes into effect, and municipalities shall then approve any proposed projects that meet the standards in the model code using objective procedures. However, a municipality may apply to the department for a deadline extension for a deficiency in water or wastewater infrastructure or supply.Additional provisions. The bill also:

  • Requires the advisory committee on factory-built structures and tiny homes to produce a report on the opportunities and barriers in state law concerning the building of manufactured homes, mobile homes, and tiny homes;
  • Removes the requirements that manufacturers of factory-built structures comply with escrow requirements of down payments and provide a letter of credit, certificate of deposit issued by a licensed financial institution, or surety bond issued by an authorized insurer;
  • Prohibits a planned unit development resolution or ordinance for a planned unit with a residential use from restricting accessory dwelling units, middle housing, housing in transit-oriented areas, or housing in key corridors in a way not allowed by this bill;
  • Prohibits a local government from enacting or enforcing residential occupancy limits that differ based on the relationships of the occupants of a dwelling;
  • Modifies the content requirements for a county and municipal master plan, requires counties and municipalities to adopt or amend master plans as part of an inclusive process, and requires counties and municipalities to submit master plans to the department;
  • Allows a municipality to sell and dispose of real property and public buildings for the purpose of providing property to be used as affordable housing, without requiring the sale to be submitted to the voters of the municipality;
  • Requires the approval process for manufactured and modular homes to be based on objective standards and administrative review equivalent to the approval process for site-built homes;
  • Prohibits a municipality from imposing more restrictive standards on manufactured and modular homes than the municipality imposes on site-built homes;
  • Prohibits certain municipalities from imposing minimum square footage requirements for residential units in the approval of residential dwelling unit construction permits;
  • Requires certain entities to submit to the Colorado water conservation board (board) a completed and validated water loss audit report pursuant to guidelines that the board shall adopt;
  • Allows the board to make grants from the water efficiency grant program cash fund to provide water loss audit report validation assistance to covered entities;
  • Allows the board and the Colorado water resources and power development authority to consider whether an entity has submitted a required audit report in deciding whether to release financial assistance to the entity for the construction of a water diversion, storage, conveyance, water treatment, or wastewater treatment facility;
  • Prohibits a unit owners' association from restricting accessory dwelling units, middle housing, housing in transit-oriented areas, or housing in key corridors;
  • Requires the department of transportation to ensure that the prioritization criteria for any grant program administered by the department are consistent with state strategic growth objectives, so long as doing so does not violate federal law;
  • Requires any regional transportation plan that is created or updated to address and ensure consistency with state strategic growth objectives;
  • Requires that expenditures for local and state multimodal projects from the multimodal transportation options fund are only to be made for multimodal projects that the department determines are consistent with state strategic growth objectives; and
  • For state fiscal year 2023-24, appropriates $15,000,000 from the general fund to the housing plans assistance fund and makes the department responsible for the accounting related to the appropriation.
    (Note: This summary applies to this bill as introduced.)

Tuesday, April 25, 2023

New Data Reveals Race, Gender, Political Affiliations of Mass Murderers Since 1998

 

New Data Reveals Race, Gender, Political Affiliations of Mass Murderers Since 1998


A memorial for the victims of the mass murder that took place in El Paso in 2019 (Photo: Wikimedia Commons)

A new dataset from the Crime Prevention Research Center compiles the demographic makeup of all mass public shooters in the United States since 1998, and the top-line results appear to contradict media stereotypes about the kind of people who use firearms to commit atrocities.

While mass murderers are majority white (57%) and male (96%), whites and Hispanics are underrepresented among mass murders compared to their share of the total American population. By contrast, those of Middle Eastern descent, Asians, blacks, and American Indians are all above their population shares.

In terms of religion, the vast majority of mass murderers are not religious or do not profess any particular religious faith. Christians comprise the largest religious group, but their share among mass murderers is far lower than their share of the larger American population. By contrast, Muslims and non-Christian religions are overrepresented compared to their share of the population.

SEE ALSO: LA Times: These Gun Laws Would Have Stopped All But One Mass Shooting Over the Last Five Years

Politically speaking, most mass shooters do not divulge any political leanings. The next most common political affiliation is “Islamic extremism,” followed by indications that suggest right-leaning and left-leaning beliefs.

“Mass public shootings” is defined as those cases where four or more people are killed at one point in time in a public place and not involving some other type of crime such as a gang fight or a robbery.

Dr. John Lott, the researcher who compiled the data, believes these facts contradict the perception that mass murderers are all white supremacists.

“Entertainment television continually provides a false impression of those who commit mass public shootings and how they commit them,” Lott says on his website. “…another myth is that attacks are frequently by white supremacists. Yet, that is far from the case.”

It is somewhat unclear where Lott sees evidence for this statement. “White supremacist” is not a political affiliation, according to Lott’s data, and there have been at least two mass murderers who articulated white supremacist beliefs since 1998, Dylann Roof and Patrick Crusius.

SEE ALSO: Bloomberg-Funded Study Finds that ‘Assault Weapon’ Bans Don’t Stop Mass Shootings

In response to our inquiry, Lott pointed out that while “white supremacist” is not a political category, he did compile information about whether the suspect was a neo-Nazi or part of some similar group. They also noted whether the case might have been a hate crime in the “part of other crime” column of the spreadsheet.

Dylann Roof, for example, is listed as a “right-wing extremist,” Robert Bowers is listed as “anti-Jewish” and Patrick Crusius is listed as “anti-government.”

Still, for the vast majority of suspects, it is not known whether they held any beliefs that suggest sympathies with white supremacism.

The data set proves that, with the exception of gender, mass murderers are more diverse than the media and politicians would have Americans believe. White supremacists may garner the most media attention, but the data doesn’t appear to be robust enough to make many generalizations.

Click here to download the data and check it out yourself. Also, please consider supporting Dr. Lott and the Crime Prevention Research Center.

Monday, April 24, 2023

Testimony: The Costs and Complexity of the Federal Tax Code Demand Refor

Testimony: The Costs and Complexity of the Federal Tax Code Demand Reform

Subscribe

Note: The following is the testimony of Dr. William McBride, Vice President of Federal Tax Policy & Stephen J. Entin Fellow in Economics at the Tax Foundation, prepared for Senate Budget Committee hearing on April 18, 2023, titled, “A Rigged System: The Cost of Tax Dodging by the Wealthy and Big Corporations.”

The Size and Distribution of the Federal Tax Burden

Chairman Whitehouse, Ranking Member Grassley, and distinguished members of the Senate Budget Committee, thank you for the opportunity to provide testimony on the distribution of the federal tax burden. I am William McBride, Vice President of Federal Tax Policy and Stephen J. Entin Fellow in Economics at the Tax Foundation, where I focus on how we can improve our federal tax code.

Today, my testimony will focus on four  points. First, I will describe the current federal tax system, showing that tax collections are near an all-time high and the burden is highly progressive. Second, I will describe how the tax code’s increasing complexity adds to this burden, raising compliance costs for taxpayers and administrative costs for the Internal Revenue Service (IRS). Third, I will describe the economic costs of the tax code’s high marginal income tax rates, which slow economic growth and reduce living standards.

Finally, I will recommend ways to reform the federal tax code to reduce complexity and improve economic incentives, grow the economy, benefit low- and middle-income workers, and raise sufficient revenues at or above current levels.

Federal Tax Collections are Near Record Highs

As a result of the economic recovery coming out of the pandemic and surging inflation, federal tax collections hit an all-time high of $4.9 trillion in fiscal year (FY) 2022 that ended September 30, topping the prior year’s record collections by $850 billion.[1] As a share of gross domestic product (GDP), federal tax collections in FY 2022 reached a multi-decade high of about 19.6 percent, up from 17.9 percent in the prior fiscal year and approaching the last peak of 20.0 percent set during the dot-com bubble in FY 2000.

Only two other years in U.S. history saw federal tax collections as a share of GDP exceed the FY 2022 level, both during World War II: in 1943, federal tax collections reached 20.5 percent of GDP before falling to 19.9 percent in 1944. FY 2022 tax collections exceeded the post-war average of 17.2 percent of GDP by 2.4 percentage points.

federal tax collections approaching a record high

In the most recent fiscal year, individual income tax collections contributed the most to the surge in federal tax collections, growing 29 percent to $2.6 trillion in FY 2022 from $2.0 trillion in FY 2021. Payroll taxes grew 13 percent to $1.5 trillion in FY 2022 from $1.3 trillion in FY 2021, while corporate taxes grew 14 percent to $425 billion from $372 billion, and other revenues grew 13 percent to $356 billion from $316 billion.

Individual income tax collections reached 10.5 percent of GDP in FY 2022, the highest level on record. That level substantially exceeded the prior record of 9.9 percent of GDP set in FY 2000 as well as the World War II-era record of 9.2 percent of GDP set in FY 1944.[2]

The surge in individual income tax revenue is partly attributable to growth in capital gains revenue due to booming stock and housing markets in 2021, itself a function of inflationary fiscal and monetary stimulus during the pandemic.[3] The Congressional Budget Office (CBO) estimates that capital gains realizations and revenue roughly doubled during the pandemic years: realizations grew to $2.0 trillion in 2021 and $1.7 trillion in 2022 from $881 billion in 2019 while revenues grew to $304 billion in FY 2021 and $378 billion in FY 2022 from $169 billion in FY 2019.[4]

Extreme economic volatility in recent years makes it difficult to assess how tax collections have been impacted by the Tax Cuts and Jobs Act (TCJA), which was enacted in 2017. Among other changes, the TCJA reduced the corporate tax rate percent to 21 percent from 35 percent. Corporate and other federal tax revenues were relatively low in 2018 through the first year of the pandemic but have since rebounded with the economy and inflation. Average federal tax collections in the five years since the TCJA’s enactment are about 17.3 percent of GDP—higher than the 16.7 percent forecasted by the CBO following its passage, higher than most years before the TCJA, and higher than the post-war average of 17.2 percent.[5]

As the inflationary boom of 2021 has turned into a bust over the course of the last year, and as the Federal Reserve continues to raise interest rates to fight the inflation, growth in federal tax collections is likely to slow in FY 2023. On a preliminary basis, the CBO reports that federal tax collections in the first half of FY 2023 (October 2022 to March 2023) are down 3 percent from the same period in FY 2022, with individual income tax revenue down 8 percent.[6] However, based on current projections, federal tax collections as a share of GDP will likely remain above the historical average in FY 2023.

Most of the Federal Tax Burden is Paid by High Earners

By any objective measure, the U.S. tax code is extremely progressive and very redistributive. According to the latest IRS data for 2020, the top 5 percent of taxpayers (about 7.9 million filers that earn more than $220,521) paid in aggregate $1.1 trillion in income taxes, amounting to 62.7 percent of all income taxes paid that year.[7] The top 1 percent of taxpayers (about 1.6 million filers who earn more than $548,336) paid $723 billion in income taxes, or 42.3 percent of all income taxes paid—a larger share than the bottom 95 percent of taxpayers combined.

The share of federal income taxes paid by the top 1 percent is higher than it has been in at least 20 years, according to IRS data.[8] In 2001, the top 1 percent’s share of income taxes paid was 33.2 percent, then fluctuated with the business cycle and the ups and downs of the housing and stock markets, before rising steadily to its current high of 42.3 percent in 2020. The top 1 percent’s share of income taxes could well go higher in 2021 and 2022 due to growth of capital gains revenue, which is paid primarily by high earners.

wealthy taxpayer data on  federal tax burden share

High income taxpayers also pay the highest tax rates, according to the IRS. The average income tax rate in 2020 was 13.6 percent. The top 5 percent of taxpayers paid a 22.4 percent average rate while the top 1 percent of taxpayers paid a 26.0 percent average rate—more than eight times higher than the 3.1 percent average rate paid by the bottom half of taxpayers. The top 0.001 percent, or the richest 1,575 tax returns filed in 2020, paid nearly $71 billion in income taxes and had an average tax rate of 23.7 percent.

The average tax rate for the top 0.001 percent is slightly lower than that of the top 1 percent because a larger share of the top 0.001 percent’s income is capital gains, which face a lower rate schedule. One justification for the lower rate is that capital gains income is earned in an environment where other taxes have already been applied. In particular, shareholder taxes on capital gains and dividends essentially apply on top of the corporate income tax of 21 percent. That is, the same dollar of corporate income is first taxed by the corporate income tax and then taxed again when distributed to shareholders in the form of capital gains and dividends. Note that the shares and average tax rates cited above do not reflect the additional burden of the corporate income tax.[9]

average federal tax burden and rate by income group

Analysis from the CBO provides a more complete picture of the distribution of the federal tax burden. When accounting for individual income taxes—including the outlay portion of refundable tax credits—corporate income taxes, payroll taxes, estate taxes, and excise taxes, CBO finds that the federal tax system, as a whole, is progressive. [10]  The latest data indicates that households in the highest income quintile paid about 69 percent of all federal taxes in 2019, and the top 1 percent of households paid about 25 percent of all federal taxes.[11] In contrast, the bottom quintile of households paid about 0.1 percent of all federal taxes.

Like the IRS data on federal income taxes, the CBO analysis indicates the share of all federal taxes paid by high earners has grown over time. For example, the share of federal taxes paid by households in the top 1 percent has approximately doubled to about 25 percent in 2019 from roughly 12 percent in the early 1980s.

share of federal tax burden by income group

Furthermore, the CBO analysis indicates that average federal tax rates increase substantially with income. For example, the top quintile of households paid an average federal tax rate of 24.4 percent in 2019 and the top 1 percent of households paid an average federal tax rate of 30.0 percent. In contrast, the bottom quintile paid an average federal tax rate of 0.5 percent, reflecting the fact that refundable tax credits for this group almost entirely offset payroll taxes and other federal taxes.

The CBO notes that within the top 1 percent’s average federal tax rates are relatively flat at about 30 percent, as the effect of lower capital gains tax rates are offset by higher average corporate tax rates.[12] For example, the top 0.01 percent of households paid an average federal tax rate of 30.2 percent in 2019.

Over time, the average federal tax rate paid by the top 1 percent has remained within a range of about 25 to 35 percent since 1979, and as of 2019 is about in the middle of that range and close to the average of 30.5 percent over the period 1979 to 2019. However, the average federal tax rate for the bottom quintile has declined substantially, to nearly zero in 2019 due to the introduction and expansion of refundable tax credits from a high of about 12 percent in 1984.

average federal tax rates vary by tax type and income level and are progressive overall

Data from the Joint Committee on Taxation (JCT) confirms that average federal tax rates consistently rise with income. When including all federal taxes, the bottom 50 percent of taxpayers face an average federal tax rate of 6.3 percent, compared to an average rate of 24.8 percent for the top 1 percent of taxpayers. The federal income tax is the most progressive of the federal taxes, with corporate income taxes and estate and gift taxes also adding to federal progressivity. The progressive tax sources more than offset payroll taxes and excise taxes that apply higher average tax rates to lower income groups. The JCT data also shows average federal taxes rise within the top 1 percent, from an average tax rate of 22.6 percent for those in the 99th to 99.5th percentiles of income to 32.9 percent for the top 0.01 percent of earners, representing about 15,000 taxpayers in the United States.

average federal tax rates vary by tax type and income level and are progressive overall

Tax Code’s Complexity Adds to the Burden

By any measure, the federal tax code is extremely complex. Totaling more than 6,000 pages and about 4 million words (plus about 15,000 pages of associated tax law interpretations), no taxpayer can reasonably be expected to fully comprehend it.[13] The complexity derives in part from the basic challenge of defining and taxing income, an endeavor the country embarked on more than 100 years ago. Every Congress and administration since has revised and added to an accumulating pile of deductions, credits, and special provisions. By official measures, there are now more than 200 such special provisions known as “tax expenditures,” costing about $2 trillion annually. In the last three years alone more than 100 tax expenditures have been created or amended.[14]

While some tax expenditures are important structural elements of the tax code, many are complicated and disproportionately benefit specific industries or types of households.[15] The CBO finds about half of the total income tax benefits of expenditures go to high-income households.[16]

The Inflation Reduction Act (IRA), enacted last year, adds several complicated provisions to the tax code, including a book minimum tax, a stock buyback tax, and more than 20 different tax subsidies for green energy. All of these require extensive regulatory guidance which continues to roll out even as much of the law took effect at the beginning of this year.[17] Taxpayers, too, have highlighted several remaining concerns and ambiguities in the law (e.g., reporting requirements and applicable financial statements for the book minimum tax, and domestic content rules for the green energy tax credits).[18]

The uncertainty in the law also translates into uncertainty about the budgetary costs and distributional impacts. For example, researchers now estimate the budgetary cost of the IRA’s green energy credits and subsidies will exceed $1 trillion over a decade, three times the original cost estimated by the CBO and the JCT, with the benefits accruing mainly to high earners.[19]

In the same month the IRA was enacted, Congress passed the CHIPS and Science Act, which provides billions of dollars of targeted (and complex) incentives and investment tax credits for semiconductor manufacturing, along with a variety of eligibility and reporting requirements.[20]

In 2022 (before the IRA or the CHIPS Act), Americans spent more than 6.5 billion hours trying to comply with the tax code, according to the latest estimates from the White House Office of Information and Regulatory Affairs (OIRA).[21] Based on wage and benefit estimates for tax preparers and certified public accountants, we estimate the hourly compliance costs of the tax code equates to about $313 billion each year in lost productivity, or 1.4 percent of GDP.[22] The compliance burden for individual taxpayers is nearly $74 billion annually, while the burden on corporate entities of complying with just their income tax returns is more than $60 billion. Much of the remaining $179 billion of costs comes from complying with hundreds of other business tax forms and regulations, such as those relating to depreciation and amortization. Compliance with income tax returns for estates and trusts costs $18 billion a year, approaching the amount of tax revenue raised by the estate tax.

Our estimate of compliance costs does not include the cost of tax planning, which is a significant industry on its own. Nor does it include the cost of uncertainty in the law for taxpayers, which makes planning for taxes as well as investment and other economic activities difficult and costly.

The majority of the compliance burden is from the complex taxing of business income, which involves tracking and reporting multiple items of income and expense to arrive at net taxable income and allowing offsets from net income to account for past losses (in a typical year roughly 40 percent of companies are in a loss position).[23] In addition, the U.S. tax code contains several business credits, exclusions, and other special provisions that increase compliance costs. Multinational corporations face a slew of complex provisions that subject various types of foreign income and cross-border transactions to tax, including Subpart F, Global Intangible Low-Taxed Income (GILTI), Foreign-Derived Intangible Income (FDII), and Base Erosion and Anti-Abuse Tax (BEAT).[24]

For individual filers, compliance costs generally increase proportionally with income, such that most of the compliance burden is borne by high earners.[25] High earning individuals typically have multiple sources of income beyond wages, including capital gains, dividends, rents, royalties, and pass-through business income from partnerships and S corporations (income from these business forms is subject to individual income tax rather than corporate income tax).

Another aspect of the tax code’s complexity is the administrative costs and challenges for the IRS, an agency whose responsibilities have grown well beyond simple revenue collection to include administration of subsidies and benefits relating to children, health care, education, housing, energy, the environment, economic stimulus, and more.[26] Pursuant to its expanded role, in FY 2021 the IRS processed some 261 million returns and forms and received some 4.7 billion pieces of information, detailing the composition and activities of nearly every American household and business.[27] In recent years, the IRS has found itself literally buried in paperwork, resulting in processing delays, millions of returns backlogged, and poor customer service.[28] Last year, for instance, the IRS answered only about 13 percent of the 173 million phone calls it received from taxpayers asking for help; those who got through waited an average of 29 minutes.[29] Clearly, administrative challenges at the IRS are also problematic for taxpayers.

A report from the Government Accountability Office (GAO) sheds light on the challenges faced by the IRS and taxpayers as a result of the increasing complexity of the code.[30] The report finds that the average number of hours the IRS spends per audit has increased about 30 percent in recent years, to 6.5 hours in 2021 from 5.0 hours in 2010. The increase is concentrated in high-income returns. Average hours per audit increased 209 percent for incomes of $5 million and above, to about 58 hours in 2021 from about 19 hours per return in 2010. Average hours per audit increased 118 percent for incomes between $500,000 and $5 million, to 34 hours from about 16, and 103 percent for incomes between $200,000 and $500,000, from about 10 to 21 hours. In contrast, audits for incomes below $200,000 took considerably less time—about 2 hours on average for incomes below $25,000, and 6 hours for incomes between $25,000 and $200,000, This remained stable over this period.

The GAO report notes that IRS officials attribute the increase in average audit hours to “greater complexity of higher-income audits and increased case transfers due to auditor attrition.” The GAO report mentions several legislative changes that have added to the IRS’s responsibilities in recent years, including the Patient Protection and Affordable Care Act, the Foreign Account Tax Compliance Act, the TCJA, as well as some 496 million stimulus payments totaling $837 billion as part of the CARES Act and other pandemic relief packages. (Note the GAO report was published before enactment of the IRA or CHIPS Act.)

As a measure of the efficiency of audits, or the “bang for the buck,” the GAO compared the recommended additional tax with hours spent on audits. The GAO found that audits of the highest income returns—those with income of $5 million or more—resulted in the highest amounts of recommended additional tax per audit hour ($4,880 in 2021), followed by audits of those claiming the EITC ($3,130) and those reporting less than $25,000 of income ($2,120). In aggregate, the majority of the total recommended additional tax came from audits of taxpayers with income below $200,000. On average, roughly half of recommended additional amounts are ultimately collected, however the collection rate for EITC returns exceeds 70 percent since these audits are typically done prior to issuing refunds.

Lastly, the GAO report documents that audit rates for individual income tax returns have decreased for all income levels, dropping to 0.25 percent in 2019 from an average of 0.9 percent in 2010, which IRS officials attribute mainly to reduced staffing as a result of reduced funding. Audit rates decreased the most for high earners because, according to IRS officials, these audits are generally more complex and require more staff time to complete.

Simplifying the tax code would reduce IRS resources required to more effectively administer it, including by reducing the time needed to audit the currently complex returns of high earners. A simpler tax code would also reduce taxpayer confusion so that there would be less need for the IRS to produce volumes of guidance and respond to millions of taxpayer calls for assistance. Less confusion on the part of taxpayers would also boost compliance.[31] As the IRS Taxpayer Advocate explains: “The most efficient way to improve compliance is by encouraging and helping taxpayers to do the right thing on the front end. That is much cheaper and more effective than trying to audit our way out of the tax gap one taxpayer at a time on the back end.”[32]

The Economic Cost of High Marginal Income Tax Rates

Decades of economic research amply demonstrates the steep cost of high marginal income tax rates that arises from disincentives to work, save, and invest.[33] The economic harm of income taxes increases with the square of the tax rate, meaning high income tax rates come with a disproportionately large additional excess burden. This burden is over and above the tax revenue collected, manifesting itself over the course of several years as a drag on economic growth through less investment, less innovation, fewer jobs, and lower wages.[34]

A study based on postwar tax reforms in the United States found that reducing marginal tax rates on individual income for the top 1 percent of earners leads to increases in real GDP and declines in unemployment, with a 1 percentage point cut in the tax rate increasing real GDP by 0.78 percent by the third year after the tax change.[35] Given the size of the U.S. economy today, that equates to about $204 billion in additional GDP for each 1 percentage point cut in the marginal tax rate on individual income earned by the top 1 percent. The study shows the benefits of the resulting economic growth would be felt throughout the economy.

In looking at the experience of developed countries over the period 1971 to 2004, researchers at the Organisation of for Economic Co-operation and Development (OECD) concluded that “a reduction in the top marginal [individual] tax rate is found to raise productivity in industries with potentially high rates of enterprise creation. Thus, reducing top marginal tax rates may help to enhance economy-wide productivity in OECD countries with a large share of such industries.”[36]

The CBO modeled three types of tax increases to fund a permanent increase in government spending of 10 percent of GDP annually: a flat labor tax, a flat income tax, and a progressive income tax. The CBO found that a progressive income tax is the most economically damaging of the three options, reducing GDP by 10 percent after 10 years, and reducing lifetime consumption and hours worked, especially for younger households.[37]

Corporate income taxes are generally more economically damaging than individual income taxes, since they make investment opportunities less profitable on an after-tax basis for corporations, reducing the likelihood that marginal investments will be pursued. In most countries including the U.S., business investment makes up the bulk of all private sector investment; more uniquely in the U.S., about half of business investment is done by corporations and the other half by pass-through businesses subject to individual income taxes.

An OECD study examining data from 63 countries concluded that corporate income taxes are the most economically damaging way to raise revenue, followed by individual income taxes, consumption taxes, and property taxes.[38] A study on taxes in the United Kingdom found that taxes on consumption are less economically damaging than taxes on corporate and individual income.[39] A study of U.S. tax changes since World War II found that a 1 percentage point cut in the average corporate tax rate raises real GDP per capita by 0.6 percent after one year, a somewhat larger impact than a similarly sized cut in individual income taxes.[40] Based on U.S. state taxes, a study found that a 1 percentage point cut in the corporate tax rate leads to a 0.2 percent increase in employment and a 0.3 percent increase in wages.[41]

Furthermore, several studies demonstrate that the corporate tax is borne in part by workers.[42] For instance, a study of corporate taxes in Germany found that workers bear about half of the tax burden in the form of lower wages, with low-skilled, young, and female employees disproportionately harmed.[43]

The corporate tax is also borne by owners of shares, including retirees earning considerably less than $400,000. In the short run, the JCT assumes owners of capital bear all of the corporate tax, yet that includes more than 90 million tax filers earning less than $200,000. In the long run, the JCT assumes workers bear a portion of the corporate tax, such that the burden falls on more than 150 million tax filers earning less than $200,000.[44]

Another factor to consider regarding the corporate tax in particular is competitiveness with respect to our major trading partners, as corporate investment is highly mobile internationally and will flow to lower tax locations all else equal. The corporate tax rate reduction from the TCJA brought the U.S. closer to the average among developed countries accounting for federal and state level taxes, though it remains slightly above average. The U.S. combined federal-state corporate tax rate in 2022 was 25.8 percent, compared to 21.2 percent in the average EU country and 23.6 percent in the average OECD country.[45]

Lastly, one of the most problematic and economically destructive aspects of the U.S. tax code is the double taxation of corporate income by the corporate income tax (and now also the book minimum tax) and shareholder taxes on capital gains and dividends. Accounting for federal and state corporate and individual incomes taxes, the top integrated tax rate on corporate income distributed as dividends is about 47 percent in the U.S., compared to an OECD average of about 42 percent.[46] Several OECD countries have integrated corporate and individual tax codes to eliminate or reduce the negative effects of double taxation of corporate income. In the U.S., after decades of double taxing corporate income, a large share of business activity has migrated to pass-through form, which has only one layer of income tax as owners report pass-through profits on their individual income tax returns.[47]

Recommendations for Reform

For several years, the Tax Foundation has observed and analyzed tax systems from around the world and evaluated them based on the principles of sound tax policy.[48] Most tax policy experts agree that taxes should be simple, transparent, and stable over time so they are easy to understand, comply with, and administer. Another element of sound tax policy is neutrality: the tax code should generally treat taxpayers equally with minimum preferences, which extends to equal treatment of immediate versus delayed consumption via saving. A tax code that embodies these principles naturally supports economic flourishing, including plentiful jobs, growing wages, upward mobility, innovation, progress, and higher standards of living.

In our annual ranking of the most competitive tax systems, we found for the ninth year in row that Estonia has the best tax code in the OECD. [49] This is in part because it has a fully integrated income tax system that avoids double-taxing corporate income through taxes at both the entity and shareholder levels. Instead of a complicated corporate income tax and separate rules that apply to passthrough businesses, all businesses are subject to a simple 20 percent tax on distributed profits (including dividends and stock buybacks). At the individual level, a simple flat tax of 20 percent applies to all individual income except dividends, since they are already taxed by the distributed profits tax. Capital gains are taxed as ordinary income at 20 percent. Rather than a complicated estate tax like ours that taxes accumulated savings at death, bequeathed assets are simply taxed as capital gains when sold by the heir with deductible basis determined only by costs incurred by the heir.[50]

Simplicity and neutrality are the hallmarks of the Estonian income tax system.[51] Taxes are so simple in Estonia that they can typically be filed in five minutes, and the cost of compliance for businesses is among the lowest of any country.[52] Estonia’s tax system is also very pro-growth, increasing small business entrepreneurship, investment, labor productivity and thereby wages.[53] Estonia’s income tax system does all of this while generating substantial revenue comparable to other developed countries.[54]

We recently analyzed the effect of a revenue-neutral reform of the U.S. tax code along the lines of the Estonian income tax system, keeping only certain features of the current code that benefit low-income households (such as the EITC and Child Tax Credit) and support saving (such as 401ks).[55] By greatly simplifying the federal tax code, these reforms would substantially reduce compliance costs, potentially saving U.S. taxpayers more than $100 billion annually, comprised of more than $70 billion in reduced compliance costs for businesses and more than $30 billion in reduced compliance costs for individuals related to individual income and estate tax returns.

In addition to compliance cost savings, our modeling of the reform’s impacts on the U.S. economy indicates it would increase GDP by 2.3 percent in the long run, amounting to about $400 billion in additional annual output by 2032 and $1 trillion in the long run (both in 2023 dollars). These changes would increase the long-run capital stock by 3 percent, amounting to $2.1 trillion in 2023 dollars. Additionally, we estimate it would add 1.3 million full-time equivalent jobs and raise wages by 1.3 percent. By increasing GDP, we would reduce the debt burden as measured by the debt-to-GDP ratio by 5.9 percentage points over the long run.

Distributionally, we find the reform would increase after-tax income overall by 2.1 percent in the long-run, accounting for improved economic growth, with a larger boost of 2.7 percent for the bottom quintile of earners and 3.0 percent for the second quintile.

More generally, the U.S. could learn from the experience of other countries in the OECD, which rely more heavily on consumption taxes than the U.S. does.[56] Value added taxes (VATs) are a major source of revenue in virtually every developed country except the U.S., and as the literature cited above indicates, VATs and other taxes on consumption are among the least economically harmful ways to raise revenue.[57]

OECD countries have also tended to abandon more complicated means of taxing high earners such as wealth taxes due to their administrative and economic challenges.[58] Rather than high capital gains taxes, or any attempt to tax unrealized capital gains, most OECD countries have lower capital gains tax rates than the U.S., and tax capital income overall at lower average tax rates.[59]

Consumption taxes can be designed to progressively tax the consumption of higher earners without the administrative complexity and compliance costs of our current progressive income tax system. For example, by splitting the VAT base in two, businesses would pay taxes on their cash flow (sales less purchases and compensation paid), while households would pay taxes on compensation received. Applying a progressive rate schedule at the household level, with the top rate matching the rate on business cash flow, is a relatively simple way to achieve progressivity within a consumption tax.[60] Under a more standard value-added tax, the most efficient way to increase progressivity would be to offer targeted relief to lower- and middle-income households.[61]

Conclusion

We as a country have built a federal tax system that is inherently complex, costly, and controversial, one that is centered on taxing both individual and business income at progressive tax rates and littered with various preferences. To the extent it is comprehensible at all, taxpayers do not perceive it as fair. The IRS has real challenges administering such a complicated tax system, but boosting the IRS budget will not fix the underlying problem that caused Americans to call the agency 173 million times last year asking for help.

As top priority, lawmakers should simplify the tax code so that taxpayers can understand the laws and the IRS can administer them with minimum cost and frustration. As the IRS’s National Taxpayer Advocate states in their most recent report to Congress, “Simplifying the Code is the most important step Congress can take to reduce taxpayer compliance burdens. Simplification is essential to the integrity of the U.S. tax system and will enhance voluntary compliance.”[62] We have outlined reforms that would reduce taxpayer compliance burdens by at least $100 billion per year.

Second, lawmakers should reduce the economic drag caused by the tax code, particularly as economic growth is expected to slow this year and most economists are forecasting a recession.[63] The tax code is one of the most effective levers available to lawmakers to address this economic slowdown, but it should not be done through preferences that are targeted and complicated but instead by broadly improving incentives to work, save, and invest through lower marginal tax rates on individual and corporate income.

We have shown that revenue-neutral tax reform can greatly improve economic growth, increasing GDP by 2.3 percent in the long run, adding 1.3 million jobs, and raising wages by 1.3 percent such that after-tax incomes for the bottom 40 percent of earners increase by nearly 3 percent on average. Additionally, the experience of other countries shows that taxing consumption as opposed to income raises substantial revenue in a more economically efficient way. To address distributional concerns, lawmakers can design consumption taxes to progressively tax the consumption of higher earners without the administrative complexity and compliance costs of our current progressive income tax system.

[1] William McBride, “Inflation is Surging, So Are Federal Tax Collections,” Tax Foundation, Oct. 13, 2022, https://taxfoundation.org/federal-tax-collections-inflation-surging/; Congressional Budget Office, Budget and Economic Data, https://www.cbo.gov/data/budget-economic-data.

[2] Office of Management and Budget, Historical Tables, Table 2.3-Receipts by Source as Percentages of GDP: 1934-2028, https://www.whitehouse.gov/omb/budget/historical-tables/; A similar measure from the Bureau of Economic Analysis (BEA) indicates federal and state individual income taxes as a share of personal income reached an all-time high of 14.7 percent in calendar year 2022. See BEA, National Income and Product Accounts, Table 2.1 Personal Income and Its Disposition, https://www.bea.gov/itable/national-gdp-and-personal-income.

[3] William McBride, “Inflation is Surging, So Are Federal Tax Collections,” Tax Foundation, Oct. 13, 2022, https://taxfoundation.org/federal-tax-collections-inflation-surging/.

[4] Congressional Budget Office, “The Budget and Economic Outlook: 2023 to 2033,” February 15, 2023, https://www.cbo.gov/publication/58848; CBO, Budget and Economic Data, Revenue Projections, by Category, https://www.cbo.gov/data/budget-economic-data#7

[5] Congressional Budget Office, Budget and Economic Data, https://www.cbo.gov/data/budget-economic-data.

[6] Congressional Budget Office, “Monthly Budget Review: March 2023,” April 10, 2023, https://www.cbo.gov/publication/58995.

[7] Internal Revenue Service, Statistics of Income, “Number of Returns, Shares of AGI and Total Income Tax, AGI Floor on Percentiles in Current and Constant Dollars, and Average Tax Rates,” Table 1, and “Number of Returns, Shares of AGI and Total Income Tax, and Average Tax Rates,” Table 2, https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-rates-and-tax-shares; Erica York, “Summary of the Latest Federal Income Tax Data, 2023 Update,” Tax Foundation, Jan. 26, 2023, https://taxfoundation.org/publications/latest-federal-income-tax-data/.

[8] Erica York, “Summary of the Latest Federal Income Tax Data, 2023 Update,” Tax Foundation, Jan. 26, 2023, https://taxfoundation.org/publications/latest-federal-income-tax-data/.

[9] The IRS statistics on shares and average tax rates also do not include the outlay portion of refundable tax credits, such as the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), which if included would reduce further the average tax rates paid by low-income filers and increase the share of federal income taxes paid by high-income filers.

[10] Congressional Budget Office, “The Distribution of Household Income 2019,” Nov. 15, 2022, https://www.cbo.gov/system/files/2022-11/58353-HouseholdIncome.pdf; Garrett Watson, “CBO Analysis Finds Income Growth and Progressive Tax Code in 2019,” Tax Foundation, Jan. 10, 2023, https://taxfoundation.org/us-income-growth-progressive-tax-code/.

[11] In CBO’s analysis, the top 1 percent income group represents about 1.2 million households. Income thresholds defining each income group vary by household size. For example, a one person household in the top 1 percent of income earns more than $447,200 in 2019 while a four person household in the top 1 percent earns more than $894,400.

[12] In CBO’s analysis, 75 percent of corporate income taxes are allocated to owners of capital in proportion to their income from interest, dividends, rents, and adjusted capital gains, and 25 percent to workers in proportion to their labor income.

[13] Demian Brady, “Tax Complexity 2021: Compliance Burdens Ease for Third Year Since Tax Reform,” NTU, April 15, 2021, https://www.ntu.org/foundation/detail/tax-complexity-2021-compliance-burdens-ease-for-third-year-since-tax-reform.

[14] The Joint Committee on Taxation, “Estimates of Federal Tax Expenditures for Fiscal Years 2022-2026,” Dec. 22, 2022, https://www.jct.gov/publications/2022/jcx-22-22/; Treasury Department, “Tax Expenditures,” https://home.treasury.gov/policy-issues/tax-policy/tax-expenditures.

[15] Alex Muresianu, “JCT Tax Expenditure Report: Not All Expenditures Are Created Equal,” Tax Foundation, Feb. 13, 2023, https://taxfoundation.org/largest-tax-expenditures-saving-investment-tax/; Erica York and William McBride, “Lawmakers Could Pay for Reconciliation While Improving the Tax Code,” Tax Foundation, Oct. 25, 2021, https://taxfoundation.org/pay-for-reconciliation-tax/.

[16] Congressional Budget Office, “Distribution of Major Expenditures in 2019,” October 2021, https://www.cbo.gov/system/files/2021-10/57413-TaxExpenditures.pdf.

[17] Alex Durante, Cody Kallen, Huaqun Li, William McBride, and Garrett Watson, “Details & Analysis of the Inflation Reduction Act Tax Provisions,” Tax Foundation, Aug. 12, 2022, https://taxfoundation.org/inflation-reduction-act/; Cody Kallen, William McBride, and Garrett Watson, “Minimum Book Tax: Flawed Revenue Source, Penalizes Pro-Growth Cost Recovery,” Tax Foundation, Aug. 5, 2022, https://taxfoundation.org/inflation-reduction-act-accelerated-depreciation/; Daniel Bunn, “How Does the Inflation Reduction Act Minimum Tax Compare to the Global Minimum Tax,” Tax Foundation, Aug. 2, 2022, https://taxfoundation.org/inflation-reduction-act-minimum-tax/; Alex Muresianu, “Breaking Down the Inflation Reduction Act’s Green Energy Tax Credits,” Tax Foundation, Sept. 14, 2022, https://taxfoundation.org/inflation-reduction-act-green-energy-tax-credits/; Internal Revenue Service, “Latest Updates on the Inflation Reduction Act of 2022”, https://www.irs.gov/inflation-reduction-act-of-2022.

[18] Chandra Wallace, “Corporate AMT Comment Letters Rich in Detail – And Disagreement,” Tax Notes, Mar. 22, 2023, https://www.taxnotes.com/tax-notes-today-federal/corporate-alternative-minimum-tax/corporate-amt-comment-letters-rich-detail-and-disagreement/2023/03/22/7g804; Yuka Hayashi and Richard Rubin, ”New EV Rules Mean Fewer Models Eligible for Tax Credit,” Wall Street Journal, Mar. 31, 2023, https://www.wsj.com/articles/new-ev-rules-mean-fewer-models-eligible-for-tax-credit-98b6b63c?st=ks82qvy8bxihh8h&reflink=desktopwebshare_permalink.

[19] John Bistline, Neil Mehrotra, and Catherine Wolfram, “Economic Implications of the Climate Provisions of the Inflation Reduction Act,” Brookings Papers on Economic Activity, March 2023, https://www.brookings.edu/wp-content/uploads/2023/03/BPEA_Spring2023_Bistline-et-al_unembargoedUpdated.pdf; Jason Furman, “Comment on “Economic Implications of the Climate Provisions of the Inflation Reduction Act,”” Mar. 30, 2023, https://www.brookings.edu/wp-content/uploads/2023/02/2b_20230330-BPEA-climate-furman-comment.pdf; Christine McDaniel, “The Cost of Battery Production Tax Credits Provided in the IRA,” Forbes, Feb. 1, 2023, https://www.forbes.com/sites/christinemcdaniel/2023/02/01/the-cost-of-battery-production-tax-credits-provided-in-the-ira/?sh=362fc62279ef; Christine McDaniel, “The Costs of Wind Production Tax Credits Provided in the IRA,” Forbes, Mar. 8, 2023, https://www.forbes.com/sites/christinemcdaniel/2023/03/08/the-costs-of-wind-production-tax-credits-provided-in-the-ira/?sh=7cd6f4295ff7; Goldman Sachs, “Carbonomics: The Third American Energy Revolution,” Mar. 22, 2023.

[20] Erica York, “Careful What You Wish For: CHIPS Subsidies Require “Excess Profits” Sharing,” Tax Foundation, Mar. 2, 2023, https://taxfoundation.org/biden-semiconductor-chips-act-subsidies/

[21] White House Office of Information and Regulatory Affairs, Information Collection Review, https://www.reginfo.gov/public/do/PRAMain.

[22] Scott Hodge, “The Tax Compliance Costs of IRS Regulations,” Tax Foundation, Aug. 23, 2022, https://taxfoundation.org/tax-compliance-costs-irs-regulations/.

[23] Arthur P. Hall, “House Way & Means Committee Testimony: Compliance Costs of Alternative Tax Systems II,” Tax Foundation, March 1996, https://files.taxfoundation.org/legacy/docs/8926e37c5827f958604933276fcb4864.pdf?_gl=1*1bocc81*_ga*MjkzNjU2MTcuMTY4MDg2NjcyOA..*_ga_FP7KWDV08V*MTY4MTI5MzY4Ni40LjEuMTY4MTI5MzczNy45LjAuMA.

[24] Kyle Pomerleau, “A Hybrid Approach: The Treatment of Foreign Profits under the Tax Cuts and Jobs Act,” Tax Foundation, May 3, 2018, https://taxfoundation.org/treatment-foreign-profits-tax-cuts-jobs-act/.

[25] Daniel Berger, Eric Toder, Victoria Bryant, John Guyton, and Patrick Langetieg, “Estimating the Effects of Tax Reform on Compliance Burdens,” Urban Institute, May 19, 2018, https://www.urban.org/research/publication/estimating-effects-tax-reform-compliance-burdens.

[26] Alex Muresianu and Garrett Watson, “Chaotic IRS Filing Season Shows the Perils of Running Social Policy Through the Tax Code,” Tax Foundation, Apr. 18, 2022, https://taxfoundation.org/irs-filing-season-2022/.

[27] Internal Revenue Service, Data Book 2021, May 2022, https://www.irs.gov/statistics/soi-tax-stats-irs-data-book; Joseph Bishop-Henchman, “Transforming the Internal Revenue Service,” Cato Institute, Apr. 11, 2023, https://www.cato.org/policy-analysis/transforming-internal-revenue-service/

[28] Internal Revenue Service National Taxpayer Advocate, “2022 Annual Report to Congress,” Jan. 11, 2023, https://www.taxpayeradvocate.irs.gov/news/national-taxpayer-advocate-delivers-2022-annual-report-to-congress/; Joseph Bishop-Henchman, “Transforming the Internal Revenue Service,” Cato Institute, Apr. 11, 2023, https://www.cato.org/policy-analysis/transforming-internal-revenue-service/.

[29] Internal Revenue Service National Taxpayer Advocate, “2022 Annual Report to Congress,” Jan. 11, 2023, https://www.taxpayeradvocate.irs.gov/news/national-taxpayer-advocate-delivers-2022-annual-report-to-congress/.

[30] Government Accountability Office, “Tax Compliance: Trends of IRS Audit Rates and Results for Individual Taxpayers by Income,” May 17, 2022, https://www.gao.gov/products/gao-22-104960.

[31] Garrett Watson, “Closing the Tax Gap and Improving the Tax Code Are Complementary Goals,” Tax Foundation, November 21, 2019, https://taxfoundation.org/closing-tax-gap-improving-tax-code/.

[32] Erin Collins, “NTA Blog: IRS Strategic Operating Plan Has Potential to Transform Tax Administration,” National Taxpayer Advocate Blog, April 6, 2023, https://www.taxpayeradvocate.irs.gov/news/nta-blog-irs-strategic-operating-plan-has-potential-to-transform-tax-administration/.

[33] N. Gregory Mankiw, Matthew Weinzierl, and Danny Yagan, “Optimal Taxation in Theory and Practice,” Journal of Economic Perspectives 2009, volume 23(4), https://eml.berkeley.edu/~yagan/OptimalTaxation.pdf; William McBride, “What Is the Evidence on Taxes and Growth,” Tax Foundation, Dec. 18, 2012, https://www.taxfoundation.org/what-evidence-taxes-and-growth/; Alex Durante, “Reviewing Recent Evidence of the Effect of Taxes on Economic Growth,” Tax Foundation, May 21, 2021, https://taxfoundation.org/reviewing-recent-evidence-effect-taxes-economic-growth/; Timothy Vermeer, “The Impact of Individual Income Tax Changes on Economic Growth,” Tax Foundation, June 14, 2022, https://taxfoundation.org/income-taxes-affect-economy/.

[34] Robert Carroll, “The Excess Burden of Taxes and the Economic Cost of High Tax Rates,” Tax Foundation, August 2009, https://files.taxfoundation.org/legacy/docs/sr170.pdf; Martin Feldstein, “Tax Avoidance and the Deadweight Loss of the Income Tax,” The Review of Economics and Statistics 81:4 (November 1999): 674-680, https://www.jstor.org/stable/2646716;

[35] Karel Mertens and José Luis Montiel Olea, “Marginal Tax Rates and Income: New Time Series Evidence,” The Quarterly Journal of Economics 133:4 (November 2018), https://academic.oup.com/qje/article-abstract/133/4/1803/4880451?redirectedFrom=fulltext.

[36] Ã…sa Johansson, Christopher Heady, Jens Arnold, Bert Brys, Cyrille Schwellnus, & Laura Vartia, “Taxation and Economic Growth.”

[37] Congressional Budget Office, “The Economics of Financing a Large and Permanent Increase in Government Spending: Working Paper 2021-03,” Mar. 22, 2021, https://www.cbo.gov/publication/57021; see also Garrett Watson, “Congressional Budget Office and Tax Foundation Modeling Show That Some Tax Hikes Are More Damaging Than Others,” Tax Foundation, Mar. 26, 2021, https://www.taxfoundation.org/tax-hikes-are-more-damaging-than-others-analysis/.

[38] Ã…sa Johansson, Christopher Heady, Jens Matthias Arnold, Bert Brys, and Laura Vartia, “Taxation and Economic Growth,” Organisation for Economic Co-Operation and Development Working Paper No. 620, July 3, 2008, https://www.oecd-ilibrary.org/economics/taxation-and-economic-growth_241216205486.

[39] Ahn D. M. Nguyen, Luisanna Onnis, and Raffaelle Rossi, “The Macroeconomic Effects of Income and Consumption Tax Changes,” American Economic Journal: Economic Policy 13:2 (May 2021), https://www.aeaweb.org/articles?id=10.1257/pol.20170241&&from=f.

[40] Karel Mertens and Morten O. Ravn, “The Dynamic Effects of Personal and Corporate Income Tax Changes in the Unites States,” American Economic Review 103:4 (June 2013), https://www.aeaweb.org/articles?id=10.1257/aer.103.4.1212.

[41] Alexander Ljungqvist and Michael Smolyansky, “To Cut or Not to Cut? On the Impact of Corporate Taxes on Employment and Income,” National Bureau of Economic Research Working Paper No. 20753 (October 2018), https://www.nber.org/system/files/working_papers/w20753/w20753.pdf.

[42] Stephen J. Entin, “Labor Bears Much of the Cost of the Corporate Tax,” Tax Foundation, Oct. 24, 2017, https://www.taxfoundation.org/labor-bears-corporate-tax/; and Alex Durante, “Who Bears the Burden of Corporate Taxation? A Review of Recent Evidence,” June 10, 2021, https://www.taxfoundation.org/who-bears-burden-corporate-tax/.

[43] Clemens Fuest, Andreas Peichl, and Sebastian Siegloch, “Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany,” American Economic Review 108:2 (February 2018): 393–418, https://www.doi.org/10.1257/aer.20130570.

[44] Joint Committee on Taxation, “Revenue Estimates and Distributional Analyses,” Aug. 3, 2021, https://www.finance.senate.gov/imo/media/doc/jct_analysis_on_corporate_tax_increase.pdf.

[45] Cristina Enache, “Corporate Tax Rates around the World, 2022,” Tax Foundation, December 13, 2022, https://taxfoundation.org/corporate-tax-rates-by-country-2022/.

[46] OECD, Tax Database Table II.4. Overall Statutory Tax Rates on Dividend Income, https://www.oecd.org/tax/tax-policy/tax-database/; Elke Asen, “Double Taxation of Corporate Income in the United States and the OECD,” Tax Foundation, January 13, 2021, https://taxfoundation.org/double-taxation-of-corporate-income/.

[47] Scott Eastman, “Corporate and Pass-through Business Income and Returns Since 1980,” Apr. 23, 2019, https://www.taxfoundation.org/pass-through-business-income-since-1980/

[48] TaxEDU, “Principles of Sound Tax Policy,” Tax Foundation, https://taxfoundation.org/principles/.

[49] Daniel Bunn and Lisa Hogreve, “International Tax Competitiveness Index, 2022,” Tax Foundation, Oct. 17, 2022, https://taxfoundation.org/2022-international-tax-competitiveness-index/.

[50] William McBride, “Biden’s New Tax Proposals are Complicated and Rife with Double Taxation,” Tax Foundation, Mar. 13, 2023, https://taxfoundation.org/biden-tax-fairness/.

[51] Estonia’s simple approach to taxing business and individual income has also been implemented in Latvia and Georgia. Daniel Bunn, “Better than the Rest,” Tax Foundation, Oct. 9, 2019, https://taxfoundation.org/estonia-tax-system-latvia-tax-system/; Gia Jandieri, “Tax Reform in Georgia 2004-2012,” Tax Foundation, July 17, 2019, https://taxfoundation.org/tax-reforms-in-georgia-2004-2012/.

[52] Kyle Pomerleau, “The Best Part of the Estonian Tax Code Is Not 5 Minute Tax Filing,” Tax Foundation, Jul. 21, 2015, https://taxfoundation.org/best-part-estonian-tax-code-not-5-minute-tax-filing/; William McBride, Garrett Watson, Erica York, “Taxing Distributed Profits Makes Business Taxation Simple and Efficient,” Tax Foundation, Mar. 1, 2023, https://taxfoundation.org/distributed-profits-tax-us-businesses/.

[53] Jaan Maaso, Jaanika Meriküll, and Priit Vahter, “Gross Profit Taxation Versus Distributed Profit Taxation and Firm Performance: Effects of Estonia’s Corporate Income Tax Reform,” The University of Tartu Faculty of Economics and Business Administration Working Paper No. 81-2011, March 23, 2011, https://ssrn.com/abstract=1793143 or http://dx.doi.org/10.2139/ssrn.1793143; Jaan Masso and Jaanika Merikull, “Macroeconomic Effects of Zero Corporate Income Tax on Retained Earnings,” Baltic Journal of Economics, 11:2 (2011): 81-99, https://www.tandfonline.com/doi/pdf/10.1080/1406099X.2011.10840502; Aaro Hazak, “Companies’ Financial Decisions Under the Distributed Profit Taxation Regime of Estonia,” Emerging Markets Finance & Trade 45:4 (2009): 4-12, https://www.jstor.org/stable/27750676; Eduardo Davila and Benjamin Hebert, “Optimal Corporate Taxation under Financial Frictions,” NBER Working Paper No. 25520, October 2021, https://www.nber.org/papers/w25520.

[54] Over the last 10 years, Estonia’s central government tax collections from income and profit amount to about 7.4 percent of GDP, compared to 7.3 percent for the median OECD country and 8.4 percent averaged across OECD countries. See OECD Tax Revenue Statistics, https://stats.oecd.org/Index.aspx

[55] William McBride, Huaqun Li, Garrett Watson, Alex Durante, Erica York, and Alex Muresianu, “Details and Analysis of a Tax Reform Plan for Growth and Opportunity,” Tax Foundation, February 14, 2023, https://taxfoundation.org/growth-opportunity-us-tax-reform-plan/

[56]Daniel Bunn and Cecilia Perez Weigel, “Sources of Government Revenue in the OECD,” Tax Foundation, Feb. 23, 2023, https://taxfoundation.org/oecd-tax-revenue-by-country-2023/.

[57] William McBride, “What Is the Evidence on Taxes and Growth,” Tax Foundation, Dec. 18, 2012, https://www.taxfoundation.org/what-evidence-taxes-and-growth/.

[58] Daniel Bunn, “What the U.S. Can Learn from the Adoption (and Repeal) of Wealth Taxes in the OECD,” Tax Foundation, Jan. 18, 2022, https://taxfoundation.org/wealth-taxes-in-the-oecd/.  

[59] Daniel Bunn and Elke Asen, “Savings and Investment: The Tax Treatment of Stock and Retirement Accounts in the OECD,” Tax Foundation, May 26, 2021, https://taxfoundation.org/savings-and-investment-oecd/#Capital; Jacob Lundberg and Johannes Nathell, “Taxing Capital—An International Comparison,” Tax Foundation, May 11, 2021, https://taxfoundation.org/tax-burden-on-capital-income/

[60] This design is known as the “X Tax,” developed by the late economist David Bradford. See Robert Carroll and Alan D. Viard, Progressive Consumption Taxation: The X Tax, (Washington, D.C: The Rowman & Littlefield Publishing Group, 2012).

[61] See Rita de la Feria and Michael Walpole, “The Impact of Public Perceptions on General Consumption Taxes,” British Tax Review 67:5 (Dec. 4, 2020), 637-669, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3723750 for a discussion on how other approaches, such as exemptions or reduced rates can, counterintuitively, increase regressivity by providing more benefits to higher-income households.

[62] Internatal Revenue Service National Taxpayer Advocate, “2022 Annual Report to Congress,” Jan. 11, 2023, https://www.taxpayeradvocate.irs.gov/news/national-taxpayer-advocate-delivers-2022-annual-report-to-congress/.

[63] See for instance: National Association of Business Economics, “Outlook Survey,” February 2023, https://nabe.com/NABE/Surveys/Outlook_Surveys/February_2023_Outlook_Survey_Summary.aspx; The Conference Board, “Probablity of US Recession Remains Elevated,” April 12, 2023, https://www.conference-board.org/research/economy-strategy-finance-charts/CoW-Recession-Probability.