Debt cripples the economy. Saving is the foundation of a healthy economy. As Americans, we save very little. One of the reasons we do not save is the tax code discourages saving. Two changes to the tax code would encourage saving and restore American prosperity:
First. Congress should end automatic withholding.
The current tax code forces employers to become tax collectors. Employers estimate the amount of tax each employee owes. They must then pay the estimated tax. Each pay period, the employer then tells the employee how much tax it paid. The real amount of tax owed is hidden from the employee. Each year we overpay our taxes by more than a billion dollars. Consequently, each of us must reevaluate our taxes each year. Often, the Government must refund the overpayment.
Ending automatic withholding will:
- Stop the IRS from using employers as tax collectors; and
- End overpayment of taxes.
Second. The tax code should be revised to reward saving.
Currently, the tax code penalizes saving. We must pay taxes on interest we earn. It rewards spending, and borrowing. The tax code should be revised to encourage saving:
- Deductions for business expenses other than capital investments should be eliminated;
- Deductions for individual expenses other than residential mortgage interest should be eliminated;
- Individual savings accounts should be exempt from income tax.
These reforms will free us from the bondage of debt with which Congress has enslaved us. These reforms will lay a foundation upon which we, and our children, can build.