When is the last time you read a mainstream press story about Republicans agreeing on important issue? Sadly, the press loves writing stories about Republican infighting and the flurry of reporting about intra-Republican skirmishes is obscuring a much more important development on its tax reform provisions.
Last week, I had the honor of serving on the GOP platform subcommittee on Jobs, Economy and National Debt, and I can tell you Republicans realize America needs tax reform and we need it now!
Yes, the party still has divisions, but the platform revealed tax reform is 1) a momentously important issue, 2) ripe for political action, 3) perhaps the single issue for which the party has its deepest agreement across all factions. It’s for these reasons that a reform push at the outset of the next presidency is increasingly likely to gain major traction.
The party’s platform envisions a tax system that stops penalizing U.S. workers and companies competing in the global economy and starts helping to foster jobs, growth and higher wages for Americans.
First, that means lowering some of the high rates that are punishing companies and workers.
The U.S. taxes businesses at the highest rate in the developed world and is behind only Chad and United Arab Emirates among the 196 countries on earth. The U.S. rate is 39 percent, while the global average is 22 percent. The European average is 18.6 percent, meaning U.S. companies competing with European firms face, on average, an over 20 percent disadvantage on taxes.
The global economy is more competitive than it has ever been, and the U.S. cannot afford to morally wound its own companies this way. The rate is part of what’s driving the “inversions” trend and must be lowered before it does more harm.
Secondly, the platform would end the U.S.’s nearly-unique policy of administering taxes on income earned anywhere in the world. Generally speaking, U.S. firms store trillions of dollars in assets overseas to avoid double taxation when it’s brought into the U.S. Ending this policy and adopting the territorial system would bring much of that money into the U.S. and creating a huge number of new jobs.
Thirdly, tax reform means eliminating special tax breaks for the politically-connected. It’s time for a “Showdown at Gucci Gulch,” to use the title of a book authored by two Wall Street Journal reporters about the last major reform bill, that leaves lobbyists sobbing into their martinis.
Even Donald Trump’s critics would likely admit he’s more likely to disrupt the cozy status quo when it comes to these breaks, which is exciting for the rest of us who don’t profit from them.
Eliminating cruft from the code makes it vastly simpler, reducing compliance costs and allowing for a lower top-line rate to achieve the same revenues for the government.
It also reduces distortions to the market, making it operate more efficiently overall.
The platform makes clear that the role of taxes in a free society are to fund the vital services of the government authorized by the Constitution. Today, we have a monstrously complicated patchwork quilt of redistribution, nanny-statism and special favors for the powerful combined the world’s highest business rates.
For example, the platform still includes eliminating the death tax. Despite its vast unpopularity, Uncle Sam still gets to take a big cut on previously taxed assets simply because their owner dies. Frequently, this results in the breakup of family-owned businesses that parents’ had hoped to pass on to their children. It’s unfair and un-American.
In the first 100 days of the next presidency, Republicans must unite for tax reform. It’s an issue that galvanizes all Republicans, conservative and moderate. It’s need has almost never been greater in our country’s history, and we have entered a political climate where the status quo should fear the winds of change.
Most importantly, it would provide a major economic boost because we would stop punishing U.S. companies and workers for competing in a global economy.Kelly Schmidt is the North Dakota State Treasurer.