America / Economy / Fiscal policy / Taxes

Rep. Ross Seeks the Start of Tax Reforms and to Bridge the Bipartisan Gap

Rep. Ross (R-FL) at a full committee hearing

Rep. Ross (R-FL) at a full committee hearing

Congressman Dennis Ross (R-FL) is making efforts to relieve bipartisan stress and initiate action on reducing the nation’s debt. Earlier this week he submitted two bills that would reduce government spending, the BOLD Act and the ZERO Act.

The BOLD Act seeks to reform how the government handles money by reducing the White House’s and Congress’ expenditures by 15%, eliminating earmarks, repealing the alternative minimum tax on individuals, removing many inefficient tax expenditures with a five-year phase-out, and setting a flat

rate of 20% on corporate tax. This act will also reduce income tax to only two brackets: 10% for those making less than $100,000 and 20% for those making more. This bill is a reformed version of a bill Ross introduced last year.

The major change between the two is that this one doesn’t seek to eliminate the tax exemption of credit unions. Removing that portion of the bill could be a great improvement. According to research by the National Association of Federal Credit Unions (NAFCU), the American people actually gain about $10 million in monetary benefits per year because they are exempt. Also, having to pay taxes would force them to cut about 150,000 jobs per year, among many other things. This is one of the first bills to propose specific reforms and tax reforms are going to be a major issue in the 2013 budget.

Meanwhile, the ZERO Act seeks to streamline government spending by converting to Zero-Based budgeting. This would require every department to come up with a budget that would go through a strict approval process, requiring every expenditure to be justified and approved.  This kind of streamlining is necessary due to what Rep. Ross calls frivolous spending that currently occurs in government agencies. It will work in a series of four steps.

First, all departments and agencies will have to provide a detailed description of all funding requests and expenditures. Second, these departments and agencies must state the legal basis for receiving an appropriation. Third, there will be three suggested funding levels for the request, two of which must be less than the previous year’s budget.  Finally, a summary of how cost effectiveness and efficiency is required. Many countries have started using this method of budgeting to cut costs, and it has the added benefit of being bipartisan; Jimmy Carter first introduced Zero-Based Budgeting in the 70’s. As a Republican, Rep. Ross is helping cross party lines and hopefully making progress towards a bipartisan measure to cut government spending.

While it is still unknown exactly how significant the savings would be, using these types of budget measures is a step in the right direction. The United States needs to reduce debt by about $4.7 trillion according to Doug Holtz-Eakin at the American Action Forum: every little bit of cost reduction helps.