We all know politicians in Washington love to talk. However, there comes a time when talk must stop and action taken. We’ve now reached that point with comprehensive tax reform.
In the 10 months since the election, which saw Republicans gain control of both the White House and Congress, there has been extensive discussion not only about fixing our out-of-control tax code, but also the need to place tax reform high on the legislative priority list.
Unfortunately, events and circumstances have continually pushed the issue to the back burner, and with the exception of a handful of hearings, as we head into fall, Congress finds itself holding an empty tax reform plate while looking at a packed, yet truncated, schedule to close out 2017.
First, lawmakers must pass a budget resolution. This step is a necessary prerequisite to even consider a tax reform package through reconciliation. Members of Congress must address this process point in the near future in order to pave the way for passing tax reform this fall.
Perhaps sensing that time is running out and looking to ratchet up the pressure on lawmakers, President Donald Trump has kicked off a series of tax reform speeches in Missouri and North Dakota with additional state events on the horizon. He’s right to press Congress to take action as unified control of both ends of Pennsylvania Avenue provides a rare opportunity to enact fundamental changes to our tax code.
Speaking in North Dakota, the president broadly laid out what that would entail as he told the crowd, “My administration is working with Congress to develop a plan that will deliver more jobs, higher pay, lower taxes for businesses of all sizes and middle classes families all across the nation.” He also declared he would like to see a tax code that is “simple, fair and easy to understand.”
If there’s one thing Americans can agree on, it’s that our tax code – standing at 2.4 million pages – is out of control. And considering it’s been almost 30 years since its last overhaul, it’s not surprising that the tax code is one bloated, complicated mess. Simplifying the tax code would relieve a tremendous burden off Americans who every April feel they need an accounting degree to file their taxes, saving them time and money.
The grass isn’t greener on the business side. American businesses pay one of the highest corporate tax rates in the developed world – nearly 39 percent combined state and federal – while our competitors continue their march to lower tax rates. The result is that companies are pulling up stakes and moving overseas to more tax-friendly jurisdictions, taking billions of dollars with them. The country needs policies that will bring those companies back to the United States while at the same time encouraging foreign investment.
A good start would be lowering that sky-high corporate tax rate and finally allowing us to be competitive on a global scale. And while many on the left argue that doing so will only benefit corporations and their shareholders, a new Heritage Foundation report lays out a case demonstrating how it’s actually workers who are harmed by the existing rate through lower wages, and they are the ones who stand to gain with a rate reduction.
Those against lowering the rate would do well to bear in mind that, as the report’s author Adam Michel puts it, “corporations are made up of people.”
“The most recent economic research shows that workers bear a majority of the economic burden of the corporate income tax in the form of lower wages,” Michel reports. “Labor bears between 75 percent and 100 percent of the cost of the corporate tax. A 20-point reduction of the corporate income tax to 15 percent would boost the relative market incomes of the poorest Americans by significantly more than it would boost those of the richest.”
Addressing opponents’ claims directly, he concludes, “They claim that cutting the corporate income tax will disproportionately benefit the rich. But the economic literature shows the opposite: The average American household will share the benefits of a corporate rate cut through higher wages. In the most optimistic scenario supported by the economic literature, a corporate tax rate cut is progressive, benefiting those at the bottom of the income distribution the most.”
It’s time for Congress to put words into action. Let’s not allow the legislative clock to run out on the best chance we’ve had in three decades to pass permanent, pro-growth comprehensive tax reform.
David Williams is president of the Taxpayers Protection Alliance.
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