TAX TIME BRINGS REFORM EFFORTS TO FORE

From the Mid-Missouri Business Journal

The month of January is one full of optimism and new beginnings. Unfortunately, January also brings moments of frustration. Thanks to the Internal Revenue Service, most folks check the mail this month with dread. In what seems like a cruel joke, one of the first pieces of mail Americans receive each new year is a tax return booklet.

Taxation may be inevitable -- but overburdensome, complicated, punitive taxation is not. During the first session of the 105th Congress, the members of the U.S. House of Representatives worked very hard to examine the current tax system and to begin to develop a meaningful strategy to create a simpler, fairer tax code.

We must continue this trend in 1998. The U.S. House Ways and Means Committee is directly involved in the formulation of federal tax laws. As a member of this committee, I've listened to lengthy testimony, read hundreds of letters and researched several of the most promising tax code reform ideas.

Perhaps one of the most disturbing aspects of the tax code is that it punished those who save and invest.

Our nation's businesses depend on the capital that is made available when individuals save and invest. Only through shrewd financial planning can people assure themselves of a secure retirement. Economists agree this is a key part of the nation's free-market economy.

However, when a taxpayer earns interest or income from stock in the form of dividends, the federal government taxes those monies. Put another way, the federal government punishes those who put away a portion of their paycheck every year to save for retirement, to purchase a first home, to send a child to college or to start a small business.

For this reason, I plan to introduce a bill this session that will allow individual taxpayers to exempt the first $200 ($400 for joint filers) of money earned in interest and dividends from their income for tax purposes.

Every year, millions of taxpayers receive a notice from their bank telling them how much they earned from their savings account. This amount is then added to a taxpayer's income when calculating how much one owes in taxes.

Under my proposal, taxpayers with less than $200 and families with $400 in interest, and dividend income will no longer be punished for thrift. All taxpayers with an interest-bearing checking or savings account, certificates of deposit or stock portfolios will keep more of what they earn.

This proposal is broad-based across-the-board tax relief. In 1995, of the approximately 118 million individual tax returns filed with the IRS, 66 million reported interest income. In addition, 26 million taxpayers reported dividend income.

Initial estimates indicate that if my bill is enacted, more than 30 million taxpayers would have their tax liability for interest and dividend income completely eliminated. For the low- and middle-income worker who goes to work everyday and puts a little money aside for the future, this is the right thing to do.

Not only will this new provision eliminate the tax on savings for millions of Americans, it will help simplify our increasingly complex tax code. Put simply, my bill will help eliminate some of the calculations taxpayers must make when they sit down in April to fill out their tax returns.

As technology progresses, the enactment of this legislation may even eliminate the need for millions of Americans to fill out a tax return. There is wide agreement in both political parties that the tax law is too complex. The new provision helps alleviate this problem.

People should be encouraged, not discouraged, from saving and investing. They should be rewarded for being financially wise and planning for their future and their children's future.

When the day arrives that we can finally scrap the present code, eliminating all destructive taxes on thrift should be a part of this reform. In the meantime, I hope Congress and the President will support my proposal as a first step in the right direction. It's the right thing to do.

Kenny Hulshof represents Missouri's 9th District in the U.S. House of Representatives. He serves on the House Ways and Means Committee.