Business is now conducted on a global basis and we have a number of emerging markets competing for the business that used to be spread between just a few world powers. In order for U.S. businesses to remain competitive with other businesses including those from emerging markets, we need to be as efficient as possible.
Our tax system and legal system are a major hindrance riddled with undue complexity, unfairness, and inefficiency. Our tax and legal systems are a major drag on our competitiveness and must be reformed.
A recent article in the Economist described the American legal system as the most lawyer-friendly system in the world and head-thumpingly complex. According to the Economist the regulations that accompany the Dodd-Frank law governing Wall Street, for example, are already 3 million words long-and not yet half finished. This is ridiculous.
Tax law is no stranger to complexity. Our tax system, through the direction of an incompetent Congress, has created a nightmare of complexity and is broken. We have one of the highest corporation tax rates in the world, yet some very large U.S. corporation pay little federal corporation income tax.
A recent article on Yahoo mentioned new analysis from the Joint Committee on Taxation that 51% of U.S. households did not pay any income tax in 2009. This too, is ridiculous.
Tax laws are extremely complex. I believe some taxpayers just about give up in trying to comply with our tax system. There are hundreds of thousands of pages of codes, regulations, interpretations and other forms of guidance.
The complexity of our legal and tax system have a direct negative impact on our competitiveness. Change will only happen with compromise. Congress must display leadership to make change a reality. With regard to tax law, we as taxpayers, must also be willing to compromise. We will need to look past certain deductions (for example the home interest deduction) to see the bigger picture. Simplification must be part of the change.