A TAXING ISSUE
April 15, 1998
As the midnight tax deadline comes and goes, the debate for tax reform rages on. Following a background report, Margaret Warner and guests discuss the current tax code and the debate to reform it.
A RealAudio version of this segment is available.
April 15, 1998
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The Senate Finance Committee continues its hearings on the IRS.
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International Revenue Service
KWAME HOLMAN: The annual ritual of taxpayers rushing to file last minute returns is well underway.
The rites of spring.
With the help of tax advisors or on their own, Americans will spend some six billion hours to meet today's midnight deadline for filing federal returns. They are trying to comply with a system a growing number of people inside and outside government say has become too complicated and burdensome. Individual tax rates begin at 15 percent and rise according to income to a top rate of 39.6 percent for the wealthiest Americans. But it's not that simple. The tax code contains hundreds of thousands of words laying out the rules for everything from deducting homeowners' mortgage interest to writing off a business's purchase of new equipment. All the complexity has prompted a growing number of calls from Congress to throw out the tax code altogether. Republican Congressmen Billy Tauzin and Dick Armey have been touring the country with dueling tax reform plans. Tauzin advocates a national sales tax to replace the income tax.
BILLY TAUZIN: Under our plan, there's no withholding of taxes from your paycheck. You get a big fat paycheck. You get more money to spend in the market place. Under our plan there is no hidden taxes.
KWAME HOLMAN: House Majority Leader Armey proposes a version of one of the most-discussed tax reform plans--a so-called flat tax.
Flat tax proposals.
REP. DICK ARMEY: And Armey flat tax, we say that we give you, if you are a family of four, as much as $33,800 that's exempt from taxation. Take care of your family first. Only after that, do you apply the 17 percent tax. There's no loopholes, no tax breaks, no social engineering.
KWAME HOLMAN: And on the Democratic side, House Minority Leader Dick Gephardt has proposed a 10 percent rate for most taxpayers but says he's open to any ideas that will overhaul the tax system.
REP. DICK GEPHARDT: The thing I like about what Mr. Armey is doing and Mr. Tauzin is that they agree that we need basic fundamental reform. I agree with that. I don't agree with their suggestions for how to do it, but we do agree on the need to do it and the desire to do it. And I would hope that through the next year we could have an ongoing national discussion of this issue because taxpayers and the citizens need to be involved in this discussion of what's at stake.
KWAME HOLMAN: However other voices, including President Clinton, warn against reform that goes too far.
President Clinton voices his concerns.
PRESIDENT CLINTON: We have to continue to be open to changes in the tax law and in the way the IRS operates and in all these systematic things that we have to continue to modernize. Of course we must, but we mustn't buy a pig in a poke. We have to continue to proceed with discipline. Scrapping the home mortgage deductions, scrapping other middle class tax cuts without presenting a clear alternative is simply reckless for the economy.
KWAME HOLMAN: But for now the 15-volume U.S. Tax Code, which has tripled in size in the last decade, is what today's tax filers have to work with.