As it currently stands, America’s system of taxation, which was last revised over 30 years ago, has become a mounting burden on individual taxpayers and businesses. At an outrageous 39 percent, the American corporate tax rate is near double the worldwide average of 18.6 percent. This excessive rate encourages American businesses to move profits and jobs overseas to lower tax jurisdictions, thereby hurting the country’s economic bottom line. Reducing the corporate tax rate and simplifying the overall tax code will be a boon to all Americans.
The good news is that these solutions are clearly a priority of the current congressional leadership. In fact, House Ways and Means Committee Chairman Kevin Brady (R-Texas) spoke Wednesday at the Reagan Ranch about how tax reform will help the American people.
A joint statement from the Trump administration and Republican congressional leaders shows a clear focus on advancing tax reform. And there also appears to be a desire from both sides of the aisle to at least get something done. We are now at a moment when a substantive tax reform bill is realistic and should be expected. Lawmakers should build on this momentum and unite behind the passage of permanent tax reform this year.
The “Big Six” leaders – Speaker of the House Paul Ryan (R-Wis.); Chairman Brady; Senate Majority Leader Mitch McConnell (R-Ky.); Senate Finance Committee Chairman Orrin Hatch (R-Utah); Treasury Secretary Steven Mnuchin; and National Economic Council Director Gary Cohn – recently released a joint statement outlining their unified position on tax reform.
The “Big Six” expressed their desire for a comprehensive overhaul of the tax code, simplifying the process to ease the current burden felt by individual taxpayers and small businesses. In order to help the middle class get ahead, they said, the broken tax code has to be fixed so that it works for families, small businesses and American job creators. Additionally, their vision sees an overall lowering of tax rates to allow small businesses to compete with large ones and so that all American businesses can compete with foreign companies.
Lowering the corporate tax rate and allowing American businesses to stay competitive in a global market needs to be a high priority for any tax reform moving forward. Cutting the current astronomical rate down to a pro-growth rate – in line with the Organization for Economic Cooperation and Development average rate – would help to revitalize small businesses that have been struggling to keep up. Reducing the rate further to 15 percent would mean even greater economic growth, with the United States becoming a destination for inversions rather than companies leaving.
In response to this joint statement, 45 Senate Democrats signed a letter to President Donald Trump, Majority Leader McConnell and Chairman Hatch outlining their hopes for the tax reform process. They voiced a desire to create “lasting” reform, not merely tax cuts in the short term. The Senate Democrats, much like the “Big Six,” said they wanted to focus on improving the wages for middle-class families and promoting job growth in all sectors. These are admirable goals that should be sought as tax reform moves forward.
The current tax code puts such stifling pressure on large and small businesses, making it seemingly impossible for them to grow. Companies are forced to pay outrageous rates that hinder their competitiveness worldwide, often forcing American jobs and capital overseas. Not only do the rates harm businesses, but the byzantine nature of the code itself makes it almost necessary to bring in outside support to ensure compliance.
A comprehensive and permanent reform to our tax code is long overdue. Chairman Hatch has announced that his committee would hold a tax reform markup in September and that he planned to hold multiple hearings on overhauling the tax code. This marks a significant step toward a competitive, pro-growth tax code. With strong national support and a commitment from GOP leadership, the time is ripe to move forward with the first encompassing tax reform in a generation.
David Williams is president of the Taxpayers Protection Alliance.
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