Taxes Are Inevitable, A Broken Tax Code Isn’t | This Week's Economy Ep. 159
As Tax Day approaches, it’s time to rethink the policies shaping America’s tax system.
Hello Friends!
They say the only things certain in life are death and taxes.
While we can’t do much about death. Taxes are written by policymakers—and that means they can be reformed.
As Americans prepare for another Tax Day, it’s a good time to step back and ask whether our current tax system is helping people prosper or quietly holding them back.
In this special Tax Day episode of This Week’s Economy, we’ll look at the kinds of tax reforms that could make the system simpler and more supportive of long-term economic growth.
Catch the full episode on YouTube, Apple Podcast, or Spotify, and visit my website for more information about Ginn Economic Consulting.
HOW TAXES IMPACT AMERICANS
The true cost of taxation is more than the check we write to the IRS. It’s the vacations we skip, the savings we delay, the home upgrades we postpone, and the dreams we quietly set aside.
April 15—Tax Day—is more than a filing deadline. It’s a moment to reflect on how much of our prosperity is redirected to fund a bloated and often inefficient system.
For a family of four, the numbers can be staggering. By the time they pay federal income taxes, payroll taxes, state income taxes, property taxes, sales taxes, and countless other hidden levies, they may surrender more than 30% of their annual income. For a household earning $100,000, that’s about $30,000—enough to buy a car, cover a year of college tuition, or make significant progress on a mortgage. Instead, it disappears into government coffers that too often overspend and overpromise.
Tax reform isn’t just about economics—it’s about fairness. Every dollar the government takes is a dollar that can’t be used to build a future, grow a family business, or support a local charity. A tax system should respect the people who fund it.
As economist Milton Friedman once warned, “The problem is not that people are taxed too little—the problem is that government spends too much.” Until we confront that truth, Tax Day will continue to represent missed opportunities for families and businesses across America.
Let’s examine policies that shrink the tax burden, restore freedom, and let people prosper!
1. Broad-Based Tax Cuts Are Best
The Principles:
Milton Friedman, the renowned free-market economist, championed a simple idea: tax systems should be broad-based with low rates and minimal exemptions. His philosophy emphasized limiting government intervention and designing tax policy to avoid distorting economic decisions.
A tax code built on these principles—low rates, a broad base, and fewer carve-outs—creates a fairer and more efficient system that allows workers, entrepreneurs, and businesses to thrive.
Meanwhile, across the country, a quiet revolution is reshaping state tax codes. Lawmakers are replacing complicated, graduated income tax systems with flatter, simpler structures—or eliminating income taxes altogether. Today, about half of all states either have no personal income tax, are moving toward eliminating it, or have adopted a flat income tax.
Why it Matters:
Tax Cuts and Jobs Act was a Good Move:
Passed last July, the One Big Beautiful Bill (OBBB) made parts of the 2017 Tax Cuts and Jobs Act (TCJA) permanent. The TCJA provided meaningful relief by lowering tax rates and doubling the standard deduction, benefits that helped many working families.
Following the passage of the 2017 TCJA, the economy performed strongly: GDP growth approached 3%, unemployment reached 50-year lows, and wages began to rise.
Targeted Carve-Outs Add Complexity:
Instead of building on the TCJA’s broader reform vision, however, the OBBB adds a number of temporary, targeted tax breaks that narrow the tax base and increase complexity. These include raising the SALT deduction cap to $40,000 and creating deductions for tips, overtime, senior expenses, and car loans. The bill also expands the Child Tax Credit, which largely functions as another income-redistribution program with weak work requirements. While targeted carve-outs may be politically appealing, they complicate the tax code and move us further away from the simplicity that broad-based tax reform requires.
States with Simpler Tax Codes:
States with simpler, lower tax systems are becoming magnets for investment, job creation, and population growth. Americans are increasingly voting with their feet, leaving high-tax states for places with more competitive tax environments.
Today, eight states have no personal income tax. Sixteen states have adopted flat income taxes, with rates as low as 2.5 percent in Arizona and 3.99 percent in North Carolina. Others—including Iowa and West Virginia—are phasing in lower rates tied to economic growth triggers. These reforms show that simpler, pro-growth tax systems are not just theoretical—they are already working in many states.
Related Reading: Check out my pieces on the OBBB’s tax reforms and the growing state tax revolution.
2. Property Tax Reform Secures Rights
The Principle:
Property rights are foundational to liberty. Yet property taxes turn citizens into perpetual tenants of the state. When homeowners must make annual payments simply to keep what they already purchased, the concept of true ownership begins to erode. Rising property tax bills are not accidental. They are the predictable result of unchecked government spending. When spending grows, property taxes often rise to cover it—leaving homeowners to absorb the cost.
Why it Matters:
“Stable” for Government Isn’t Stable for People
Property taxes are often defended as a “stable” source of government revenue. But that stability primarily benefits government budgets, not taxpayers. For families, renters, and employers, property taxes create ongoing uncertainty as bills increase year after year. These increases don’t occur because markets fail—they occur because governments expand spending and adjust tax rates or assessments to fund it.
Lock in & Push Out Effects:
Property taxes distort economic behavior in ways that are rarely captured in standard incidence studies. The lock-in effect discourages families from moving because purchasing a new home often triggers a higher assessment. At the same time, the push-out effect forces seniors and lower-income residents out of homes they have already paid off. Together, these distortions penalize both entry into and exit from the housing market, making property taxes uniquely harmful.
Consumption Taxes are a Better Option:
Rather than preserving an outdated system, states should consider shifting toward consumption-based taxes. Unlike taxes on income or property, consumption taxes align more closely with economic activity and personal choice. They also tend to be more transparent and simpler, replacing complicated and distortionary tax structures with a system that encourages savings, investment, and long-term economic growth.
Related Reading: For more, download my state and local policymaker guide here:
3. Taxes on Businesses Hit Consumers
The Principle:
Rather than pursuing efforts to centralize global tax policy and empower international bureaucracies, countries should focus on improving their own domestic tax systems. The United States, which currently has a federal corporate tax rate of 21%, should prioritize lowering rates while also restraining government spending. A competitive tax system encourages investment, job creation, and long-term economic growth.
Why it Matters:
Corporate Taxes Ultimately Hit Consumers
Businesses must remain profitable to survive. When governments increase corporate taxes, companies don’t simply absorb the cost. Instead, those costs are often passed on to consumers through higher prices, fewer job opportunities, and lower wages.
Tariffs Also Raise Prices:
Similarly, tariffs act as taxes on Americans—and they add uncertainty. About half of U.S. imports are intermediate goods—raw materials, components, and machinery that American businesses rely on to produce goods at home. When tariffs raise the cost of these inputs, those higher costs ripple throughout the supply chain. The result often shows up as higher prices at the store, fewer jobs created, slower wage growth, and lower returns on investment.
Index Capital Gains for Inflation:
Capital gains are disproportionately affected by inflation because they are taxed when assets are sold, often years after purchase. Under current law, capital gains are taxed on nominal returns rather than real, inflation-adjusted gains. Consider a middle-class investor who buys $100 in stock and sells it four years later for $122. If inflation during that period totaled about 22%, the investor has no real gain in purchasing power—yet still owes taxes on the $22 “profit.” This creates a hidden inflation tax that overstates economic gains.
Indexing capital gains for inflation would remove this distortion and free up billions in capital for entrepreneurial ventures and small businesses—the engines of long-term economic growth.
Keep American Businesses Competitive:
When tax rates rise, businesses have strong incentives to move investment—and sometimes entire operations—to places with more competitive tax systems. Lowering or eliminating corporate income taxes can help keep investment in the United States, encourage businesses to expand domestically, and make America a more attractive place to build and grow companies. An easy path forward is switching to consumption-based taxes—such as final sales and use taxes rather than value-added taxes—that better align taxation with spending decisions.
Related Viewing: Ryan Ellis and I discuss corporate taxes and tax policy issues on the Let People Prosper Show.
4. Sustainable Tax Cuts Through Spending Restraint
The Principle:
Tax reform works best when it is paired with sustainable budgeting—a simple, rules-based approach that limits annual spending growth to the rate of population growth plus inflation. This benchmark, recommended by my Sustainable Budget Project at Americans for Tax Reform, keeps government growth aligned with taxpayers’ ability to pay.
When spending rises faster than that, governments inevitably turn to higher taxes, mounting debt, or both. Smart budgeting keeps spending in check, creating the fiscal space needed for lasting tax relief and stronger economic growth.
Why it Matters:
Sustainable Budgeting Is Essential
Federal and state lawmakers should adopt balanced budgets that limit spending growth to no more than population growth plus inflation. This straightforward formula prevents the government from expanding faster than the people who fund it. Colorado’s original Taxpayer Bill of Rights (TABOR) remains one of the best examples of how sustainable budgeting can work in practice.
Return Surpluses to the People:
When governments collect more revenue than they need, the surplus should be returned to taxpayers through broad-based tax relief—not used to justify new programs or temporary spending increases. Taxpayers should benefit when revenues exceed expectations.
Start with Cutting Corporate Welfare:
One of the most effective ways to clean up government budgets is to eliminate subsidies, targeted tax carve-outs, and handouts to politically favored companies. This kind of corporate welfare distorts markets, disadvantages smaller competitors, and wastes taxpayer dollars. It is not the same as lowering the corporate tax rate for everyone. A fair, competitive marketplace doesn’t require government to pick winners and losers.
Related Viewing: I explain these spending principles in more depth in episode 104 of This Week’s Economy.
Bottom Line
Lower and less burdensome taxes support stronger economic growth. And when the economy grows, tax revenues often grow with it—something many politicians say they want.
Policymakers should focus on pro-growth policies instead of raising taxes and hoping that somehow leads to growth. It won’t. Sustainable prosperity requires both competitive tax policy and responsible spending. After all, deficits are simply taxes deferred to the future.
Healthy tax competition between states is also encouraging—and it’s already happening. States that simplify their tax codes and lower rates are attracting people, investment, and opportunity.
When federal and state governments get tax policy right, they create an environment that attracts investment, encourages entrepreneurship, and allows families to prosper. Governments that ignore these principles often find themselves back where they started—wondering why the tax cuts they passed just a few years earlier didn’t last.
CHECK OUT MY GUIDE TO STATE SUSTAINABLE BUDGETING HERE:
Thanks for joining me in this episode of "This Week's Economy." For more insights, visit vanceginn.com and get even greater value with a paid subscription to my Substack newsletter at vanceginn.substack.com.
God bless you, and let people prosper!
