Tags: Walker | Overhaul | Tax | Code

Former Comptroller David Walker: Sweeping Overhaul of Tax Code ‘Desperately’ Needed

By    |   Friday, 24 Feb 2012 01:27 PM

The United States needs to "desperately" overhaul its tax code if it wants to maintain its competitiveness and avoid succumbing to a North American version of a Greek crisis, says David Walker, former Comptroller General of the United States.

A new tax code should lower, but broaden, rates and cut many exemptions  complicating the process.

"We desperately need a comprehensive overhaul of the tax code," he told Newsmax.TV in an exclusive interview. "That means individual taxes, corporate taxes and the estate tax in an integrated fashion. It is one of the greatest needs that we have, and I believe that we will achieve it."

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"I believe the way we need to approach tax reform is to eliminate deductions, exemptions, credits and exclusions, lower the top marginal tax rate to 25 percent, eliminate the difference between investment income and wage income," Walker said.

"And I think that will make it simpler, fairer, more competitive and more equitable and will generate more revenues and will not have an adverse impact on job creators."

Eliminating deductions doesn't mean doing away with all of them, as those that benefit the economy should stay in place.

"Three examples would be charitable contributions — people need to get a full deduction for charitable contributions — a reasonable level of savings for retirement purposes and thirdly, an appropriate deduction for home mortgage interest for one home up to the maximum conforming limit, which varies by region of the country," Walker says.

Spending in the United States has been out of hand for years, and sensible fiscal policies must take center stage if the country is to avoid a Greek-like crisis.

While the United States isn't in danger of following directly in the footsteps of Greece due to the overwhelming fundamental differences in the two economies, the country is in danger of sliding into its very own debt crisis.

"The math says that if you look at our debt as a percentage of the economy and if you add what we owe Social Security and Medicare, which I believe you should — several trillion dollars — then we're about two years away from where Greece was when it had its debt crisis," Walker says.

"We're not Greece because we are the largest economy on Earth, we're the temporary sole superpower, and we have over 60 percent of the world's global reserve currency and issue debt in our own currency. But we are not exempt from the laws of prudent finance," Walker adds.

"We will eventually have a debt crisis in the United States if we don't change course," he said.

Part of changing course involves the government making room for the private sector to serve as the engine of growth, innovation and job creation, Walker says

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2012

The government needs to create policy to make sure that happens.

Excess regulations and otherwise restrictive policies will do the opposite to incentivize the private sector to hire and grow.

"Right now, there's trillions of dollars of cash hanging up on corporate balance sheets because we have no idea what the tax system and what the regulatory structure is going to be like in the future, and that's not conducive towards making big investments," Walker says.

Focusing on current issues, Walker points out that the recent payroll tax cut extension won't bring more sustained recovery and hiring as broader and comprehensive tax and fiscal overhaul would bring.

"When the Congress and the president agree to extend the 2 percent payroll tax cut through the end of the year, they did not offset that with spending cuts elsewhere in the budget or otherwise generate alternative revenues. So therefore it will basically add to the deficit and add to our debt burdens," Walker says.

Other tax policies are set to expire this year as well, but don't expect lawmakers to rush to address the issue of sweeping tax overhaul in an election year.

"You've got the expiration of the Bush-Obama tax cuts, you've got the expiration of the payroll tax cuts, you've got the debt-ceiling limit, a bunch of across-the-board defense and other cuts are supposed to happen," Walker points out.

"I think in reality there will be some type of compromise that's reached, and ultimately I think we will achieve comprehensive tax reform but not before 2013."

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2012

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