Comptroller General David Walker delivered testimony this week at the Senate Finance Committee’s hearing on “Our Business Tax System: Objectives, Deficiencies and Options for Reform.” Walker, who runs the Government Accountability Office, framed his testimony around the need for broader tax reform, telling the senators that the size of business tax revenues makes them very relevant to any plan for addressing the nation's long-term fiscal imbalance. In a report prepared by the GAO that accompanied Walker’s testimony, the office said that the design of the current system of business taxation is flawed. “It distorts investment decisions, hurting the performance of the economy,” the report said. “Its complexity imposes planning and record keeping costs, facilitates tax shelters and provides potential cover for those who want to cheat.” Walker said that some features of current business taxes channel investments into tax-favored activities and away from more productive activities, reducing the economic well-being of all Americans. Walker said principles that should guide the business tax reform debate include:
- The proposed system should raise sufficient revenue over time to fund current and future expected expenditures;
- The tax base should be as broad as possible, to minimize overall tax rates;
- The proposed system should improve compliance rates by reducing tax preferences and complexity and increasing transparency;
- To the extent other goals -- such as equity and simplicity -- allow, the tax system should aim for neutrality by not favoring some business activities over others; and,
- The consideration of transition rules must be an integral part of any reform proposal.
