America’s tax code is overly complicated, confusing, and, at more than 74,000 pages long, a burden on working American taxpayers. For decades, politicians have talked about fixing our broken tax system, but little ever happened.
Republicans won the White House and majorities in both chambers of Congress in 2016 on the promise to change that trend and finally accomplish pro-growth tax reform. It was the biggest pledge of the campaign season and one echoed by every Republican. Now, one year later, Republicans are on the cusp of making good on that promise.
I say Republicans because Democrats have taken every opportunity to block or otherwise oppose tax reform efforts. That’s too bad because our country needs a tax system that accelerates growth, encourages investment, and makes America more competitive.
The House and Senate have both passed versions of tax reform. Neither bill is perfect, but when dealing with Congress, it’s never wise to hold out for the perfect when the good is within reach. Members from both chambers have spent the last few days trying to resolve the differences between their two versions.
The clock is ticking.
Republicans need to pass tax reform by the end of this month for two reasons. First, voters are fed up with the inability of Congress to get things done. One recent poll found 81 percent of Americans say tax reform should be among the top priorities of Congress.
Overhauling the tax code will deliver important savings to working families by doubling the income threshold under which they pay no taxes at all, doubling the child tax credit, and lowering the 15 percent tax rate to 12 percent. More money in the pockets of taxpayers means more money circulating in the economy.
Second, letting tax reform slip into 2018 would mean it inevitably bumps up against other priorities, costing it both momentum and focus. Senate Majority Leader Mitch McConnell has said issues like immigration and modernization of the military should be addressed next year in order to clear the way for tax reform. He’s right. We’ve gone too far down the path toward a comprehensive overhaul of the tax system to lose our way now.
It falls to a small handful of members from each chamber to work out the differences. Some of the issues will be easy enough to resolve. Among the stickier wickets in the mix is the Senate’s decision to delay the cut to the corporate tax rate until 2019, compared to the House bill which has the change taking effect next year.
Cutting the corporate tax rate from 35 percent to 20 percent will make American companies more competitive globally and spur domestic investment, creating jobs and raising wages. Delaying the rate cut would postpone those economic benefits and result in slower growth.
For businesses such as my company, Canary, reducing the corporate tax rate and allowing companies to deduct 100 percent of the cost of investments in the year they are made will make it easier to put money into growing our operations and adding employees. After years of no growth, we’re overdue for the kind of investments that will allow Canary to add trucks, equipment, and people — all of which will boost productivity.
Another important benefit of reducing the corporate rate would be to spur multinational companies to return profits to the United States, increasing federal revenue, and leveling the playing field.
Numerous analyses have shown that the Republican plan will create jobs and economic growth. The Council of Economic Advisors estimates GDP could increase as much as five percent over the next decade — equal to an additional $700 billion to $1.2 trillion in economic output. Tax reform enacted by past presidents all spurred years of economic growth.
Conferees from the House and Senate will undoubtedly burn the midnight oil to hammer out a final package. Their top priority should be getting tax reform done before the end of the year. It’s time for Congress to seize this historic opportunity to reform the tax code.
