By Chicago Mayor Richard M. Daley
May 1, 2006

Over the last several weeks, more than 76 million American families and businesses spent more than six billion hours and approximately $130 billion on tax preparation. Individually, taxpayers spent about 26 hours to complete their tax returns – but still ended up paying about $157 out of their pockets to professional tax preparers for assistance. Doesn’t this tell you that the current tax code is too complicated and cumbersome for most Americans?

The current tax code stacks the deck against working and middle class families and in favor of those who can hire accountants and lawyers to reduce their tax liability. It is time to simplify our federal tax code in a way that rewards work and individual opportunity and helps working families raise their children, buy a home, and save for college and retirement.

For example, parents and students who use federal tax incentives to help pay for college have to negotiate a patchwork of five different tax breaks, multiple definitions of qualifying education expenses, and various income eligibility requirements. Why not establish a consolidated College Tax Credit that replaces existing credits and makes it easier for families to both pay for college and complete their tax returns?

The Earned Income Tax Credit is one of the most efficient tools we have to promote work and help working families raise their children. But it can be very confusing, and families not only struggle with hundreds of pages of tax code and IRS regulations, but with the overlapping tax incentives designed to help them support their families. Why not consolidate these credits into a unified and more generous Family Tax Credit that rewards working families?

The Home Mortgage Deduction allows taxpayers to deduct interest payments made on home mortgages of up to $1 million. But the deduction is only available to people who itemize their taxes, which excludes about half of more than 70 million American homeowners. If we moved the Home Mortgage Deduction “above the line” and made it available to individuals who do not itemize their taxes, it would be available to millions of working and middle class homeowners who don’t benefit from the deduction today.

And wouldn’t it be nice if, instead of spending all of that time and money preparing your tax return, you simply received a first draft in the mail from the IRS that you could review, and if all was correct, send right back in? Employers and banks already report earnings information directly to the IRS, so requiring the agency to plug in the numbers and calculate a taxpayer’s liability or refund is entirely possible. This might not work for taxpayers with a significant amount of investment income and lots of deductions to itemize on their returns. But approximately two-thirds of Americans who don’t itemize their taxes could easily benefit. California has already piloted a system like this, and there is no reason the IRS couldn’t do the same -- dramatically simplifying the process for millions of Americans.

The tax code should be simplified for businesses, too. Federal tax incentives have been an important part of revitalizing urban areas, stimulating business investment in difficult-to-develop communities, and creating jobs for local residents. But many businesses don’t use the credits because they don’t know about them or find them too complicated. Why not consolidate these tax incentives into a single Jobs Tax Credit? Simpler, streamlined credits would ensure that businesses big and small could understand and utilize them.

Let’s face it: It’s time to simplify the federal tax code. Twenty years have passed since Congress enacted meaningful tax reform, and, since then, about 14,000 changes have been made. And with every change, no matter how well intended, ordinary Americans are finding it more and more difficult to keep up.

Mayors need to put tax reform on top of their federal agendas. In Washington, federal tax reform may be on the verge of falling off the agenda, but in our cities it’s more important than ever. As we continue to fight for urban programs that have increasingly smaller budgets, trillions have been spent on the tax side.

As mayors, we must advocate for federal tax reform that simplifies the tax code and rewards work and individual opportunity by consolidating and improving tax incentives for homeownership, savings and education. We must ensure that tax reform respects state and local tax bases. And we should fight to ensure that Congress pays the long-term costs of tax reform now, by closing special interest loopholes and keeping tax cuts focused on working and middle class families.

Leaders in Washington need to seriously consider recommendations from the nation’s mayors – and not put this important issue on the back burner. Everyone in Washington claims to be on the side of working families. Tax reform is a chance to prove it.