Editor’s Note: For an alternative viewpoint, please see: Counterpoint: Tax Reform Is Not Going to Happen; Big Tax Cuts for the Rich Unfortunately Might
The Republicans in Congress and the White House are committed to passing a powerful reform of our tax code that will create jobs, economic growth, simplify the complex tax code and return money to hard-working Americans. This year.
For the last eight years the American economy has grown at 2 percent per year. It is the weakest recovery following a recession since World War II.
When President Reagan responded to the recession and double-digit inflation of the early 1980s, he cut tax rates and in the first year the tax bill took effect 4 million jobs were created. Growth ran at 4 percent a year for seven years.
If we had grown at Reagan tax-cut-rates instead of Obama stimulus-spending-and-tax-hike-rates, there would be 12 million more Americans at work today. Too many lives, families and communities have been damaged by tax-and-spend politics that killed jobs and opportunity.
Tax reform and reduction will change that. It did in the 1920s, the 1960s and the 1980s.
The Republican plan begins by doubling the standard deduction. Individuals now have a standard deduction — the amount of earning that is completely free of federal taxes — of $6,000. That will double to $12,000. A married couple now has a standard deduction of $12,000. That will double to $24,000. This is a significant tax cut.
It is also tax reform: after this reform only 5 percent of Americans will have to fill out complicated forms to itemize their deductions. This is a big step toward a tax return that can be filled out on a postcard.
And there is more. Today, American face seven income tax rates. This will be reduced to three. All Americans who pay federal taxes will see a reduction in their tax rates.
Special interest deductions and credits and loopholes will be eliminated. In eight years of Obama that did not happen. It is long past time to strip our tax system of corporate welfare and self-dealing.
One challenge America faces is that in an increasingly competitive world, American businesses pay a combined federal-state tax rate of 39 percent while the European average is 19 percent. Foreigners are not destroying our jobs — our government’s tax code is destroying our jobs. This must stop now.
President Trump has called for reducing the 35 percent corporate rate to 15 percent. That would move America from having one of the least competitive tax burdens to one of the most competitive. That means jobs and growth.
And lowering the tax burden on businesses working to create jobs and wealth is not just for larger corporations. The Republican plan also reduces the business tax on those businesses where the entrepreneur pays taxes through the individual rates. Those are known as Subchapter S corporations or “pass throughs” or partnerships, and sole proprietorships. These are tens of millions of smaller businesses that employ half the workforce and earn half of all business earnings. They pay a top federal rate of 44.6 percent.
Our government should get out of the businesses of crushing small and growing companies.
Tax reform will also allow the $2.6 trillion in earnings parked overseas to come back to the United States so that businesses can invest in jobs and opportunity here. Our present tax code locks that money outside the country. That is stupid and destructive and must and will stop this year.
And another big change that will create millions of jobs is moving from long depreciation schedules toward immediate 100 percent full expensing for new business investment. New factories and machines that make Americans more productive should not be discouraged by taxes and red tape. John F. Kennedy moved in this direction as did the Reagan reforms. But there has been backsliding. We will restore expensing so we do not double tax and discourage new investment in America.
Life is tough enough without an IRS actively discouraging and penalizing work, savings and investment. America should not be locked into slow and halting 2 percent growth. We can return to rates closer to 4 percent and higher. There are no limits on what Americans can achieve if we get the tax collector out of the way. Taxes can be simpler, lower, transparent, fairer and understandable — written in English.
The tax reform legislation is being drafted now and will be introduced in the House and Senate by the last week of this month. It will pass the House in October and the Senate before Thanksgiving.
Those Americans looking to get a job back or get their first job or enjoy a deserved raise need tax reform and tax reduction now. They deserve a government and tax code that works for them, not the present mess that fights against them and their families.
