Our next installment of Tax Talk 2010 features Carly Fiorina, the Republican candidate for California Senator. I emailed Ms. Fiorina a set of six questions related to tax. Follows are her unedited answers:
1. What’s the single most important tax issue facing Americans today?
Americans need immediate tax certainty. Congress’ failure to prevent tax increases on all Americans by doing nothing to extend the 2001 and 2003 tax relief until after the November election is cynical politics at its worst and will only serve to exacerbate what has been the most severe recession since the Great Depression. Without congressional action to extend current tax rates, Americans will face the largest tax increase in American history – more than $3 trillion in higher taxes. For the average middle-income family in California, this tax increase will translate to an additional $1,600 in taxes. Barbara Boxer has done nothing to stop this from happening.
With the national unemployment rate unwilling to budge from 9.6 percent and Californians suffering under an even higher rate of 12.4 percent, hard-working Americans are already facing incredibly difficult economic times. Saddling taxpayers and job creators with more taxes at a time when our priority should be economic growth and recovery is the wrong economic policy. The non-partisan Congressional Budget Office has recently stated not extending the current tax rates will hurt our economy. Congress must put politics aside and act now – not after the election – to provide tax relief for all Americans.
2. If you could only make one “quick fix” in terms of an extra credit, a disallowed deduction, whatever – what would it be?
If America wants to remain home to innovators and entrepreneurs, it must make the Research and Development (R&D) tax credit permanent, as well as simplified and more competitive. We currently rank 17th in this tax credit with our competitors. Recent data by the Commerce Department shows that foreign subsidiaries of U.S. corporations increased their R&D spending by more than 7 percent in 2008 from the previous year. These same corporations, however, cut their R&D investment in the U.S. by 2.2 percent. Losing critical R&D investments to foreign countries hurts job creation and other economic benefits that are derived from R&D breakthroughs. We must act now to simplify, make more competitive, and make permanent our R&D tax credit to support American innovators, entrepreneurs, and workers.
3. Which is a more egregious tax on the American public: the AMT or the federal estate tax?
They are both egregious. The AMT undoubtedly has an unfair and unintended effect on a significant segment of middle-class taxpayers that must be addressed. The AMT was intended for just a few hundred wealthy taxpayers when it was first enacted, but now threatens tens of millions of middle-class Americans. This is another issue left unresolved by Congress – there is no AMT “patch” for 2010 at this point.
The estate tax however has also gone unresolved, and will jump from zero to 55 percent next year. The damage caused by the estate tax reaches throughout economy. Without investments in capital and businesses, we will stunt job creation efforts. The fact that the estate tax punishes the small businesses that are the driving force of new job creation and are the key to kick-starting the economy is reason enough for its elimination. Small family-owned businesses, in particular, sometimes have a difficult time meeting estate tax obligations because available dollars are usually reinvested to employ workers and grow the business. The tax flies in the face of the American Dream, which for many is the promise of building a business and someday turning it over to your children and grandchildren.
4. It has been suggested that the IRS should be eliminated. Do you believe that this makes sense, and if you do, what would you establish in its place?
I am a strong advocate for lower taxes and a common-sense tax structure that is fair, provides certainty, and incentivizes economic growth, however eliminating the IRS will do nothing to bring that about, we need our elected leaders to do that. Instead of stifling families, small businesses and job creation, however, the IRS can help to implement tax policies that are friendly to taxpayers and reduce the compliance and paperwork burden.
5. Do you think that significant tax cuts are possible considering the current state of the economy?
We must first accomplish the tax to-do list that has gone unattended by Congress. The Joint Tax Committee says there are 40 tax provisions that will expire at the end of the year. We can’t afford not to keep these provisions in place, it will hurt our already struggling economic growth. Congress must also act to extend the tax relief passed in 2001 and 2003 to protect middle class families. My opponent left Washington without doing anything to ensure this tax increase, which will cost middle income average California families $1600 annually, does not go into effect. People know best how to spend their own money, not Washington.
6. And just for fun, if Uncle Sam handed you a huge refund check right now, what would you do with it?
I have been fortunate to live the American Dream, but I realize that young girls all around the world do not enjoy the same opportunities as I did. I have worked with some great organizations – including the One Woman Initiative – that have promoted the cause of women in the areas of economic empowerment and political participation. I would donate my refund check to these types of organizations so that girls and women have the opportunity and the tools they need to lift their families from poverty and become powerful engines of economic growth in their communities.
Thanks to Ms. Fiorina for her participation! You can find out more about Ms. Fiorina here.