Between health care reform, the border wall, and growing international unrest, Washington has a lot on its plate in the weeks to come. But we must make a point of prioritizing tax reform. Thirty years have passed since the last serious reforms, and our economy has been hampered by our outdated system. We haven’t achieved growth of 3 percent or higher since 2005.
President Trump ran on the repeated promise to undertake comprehensive tax reform that would spur job creation and stimulate economic growth. As he works with Congress to reform our nation’s tax code, we must unite around a shared vision to make taxation fairer and simpler for both businesses and individuals. Here are six principles that should guide our efforts:
Simplify the tax code. Our federal tax code is currently a 74,000-plus page document that, in 2016, forced Americans to spend 9 billion hours and $409 billion figuring out how to comply with its requirements.
Americans shouldn’t have to shell out additional money and time to determine how much money they already owe the government. Congress must lower compliance burdens so that filing a tax return is no more difficult than filling out the back of a postcard.
Broaden the tax base. For this kind of simplicity to succeed, however, Congress must eliminate the complicated and ever-increasing loopholes that make up the majority of the tax code. Most of the loopholes benefit large corporations with powerful special interest lobbies, skewing the system against ordinary American workers and entrepreneurs.
Instead, Congress should raise the standard deduction across the board and cut the majority of specialized deductions, only retaining exceptions like charitable deductions.
Lower and consolidate individual tax rates. Simplification can also be achieved on an individual level by reducing the amount of tax brackets from our current seven-bracket system to a two-bracket or three-bracket system. This will streamline bureaucratic processes and, if rates are kept low, will give Americans more money to invest in creating new businesses, hiring new employees and investing in new markets.
Reduce corporate tax and investment tax rates. The same principle holds true on the corporate level. Our corporate tax rate is one of the highest in the world and prohibits many enterprising Americans from starting their own businesses. Reducing both the corporate tax rate and investment tax rates will make it possible for American initiative and ingenuity to flourish.
Repatriation of overseas cash. High taxes and a restrictive regulatory environment has not only blocked enterprise at home, but it has also forced American ingenuity to go abroad. Many companies have relocated overseas in search of a more welcoming business environment.
President Trump helped American corporations significantly with his executive order on regulations, but this alone will not bring American companies back home. We must find ways to incentivize these businesses to come back to our shores, bringing their capital and their jobs with them.
Tax reform, not unpaid for tax cuts. With a federal debt of nearly $20 trillion and a deficit of $559 billion for this fiscal year alone, temporary unpaid for tax cuts are not the solution to our country’s financial problems. Should these tax reforms increase the federal deficit, Congress must begin to make cuts to spending and aim for budget-neutrality.
This is a big wish list, but with Republicans in control of both chambers and a president in the White House who is unafraid of controversy, now is the time to act. Delay will only result in decades more of the piecemeal tweaks that have slowed our economy to its current standstill.
The American people have shown confidence in Republicans, and it is time for Republicans to make their own show of confidence in the American people by freeing them from their tax burdens and allowing them to invest, create and spend as they see fit.
David Schweikert represents Arizona’s 6th Congressional District and sits on the U.S. House Ways & Means Committee. Adam Brandon is the president and CEO of FreedomWorks.
The views expressed in guest commentaries are those of the authors and are not the views of the Arizona Capitol Times.