In his book as part of the Room To Grow series, Ryan Ellis identifies four fundamental flaws that beset America’s current tax code and offers principled, practical solutions to reform the system. First, our business tax code is a barrier to growth, replete with tax rates that are among the highest in the developed world, often approaching 50 percent. The code also levies multiple layers of taxation against certain kinds of income and imposes an arbitrary, punitive system that inhibits business investment. To reform the business tax code, Ellis proposes several solutions, including establishing a lower, more competitive tax rate, reducing taxes on capital gains, and allowing businesses to deduct 100 percent of their investments in the year they are made.
Second, the tax code burdens middle-class families, particularly in the form of payroll taxes and a low, per-child tax credit, which hasn’t been increased since 2001. To provide them with much needed relief, Ellis offers several suggestions, including reducing the payroll tax and increasing the per-child tax credit.
Third, America’s tax code, over which well-heeled special interests yield great influence, rewards crony capitalists with narrowly tailored benefits and high earners who find refuge in tax shelters. Among other solutions, Ellis recommends policymakers eliminate some tax expenditures, terminate tax breaks that provide preferential treatment, cap deductions for high earners, and limit or close tax shelters.
Finally, the tax code’s complexity creates unnecessary costs and imposes barriers for America’s families and small businesses. To address these issues, Ellis advocates consolidating education tax credits into one, unifying existing tax benefits associated with children into a single tax credit, increasing the standard deduction, and having federal policymakers work with state and local governments to devise better tax systems for startups.