Encouraging Economic Freedom Through Tax Reform
In Washington these days there is no shortage of chatter about the need for fundamental tax reform. Not just small tweaks to the system, but a large, comprehensive overhaul. Lost in that larger debate is the current reality facing families and businesses–expiring or expired tax provisions that Congress routinely reauthorizes along with the coming 2013 fiscal time bomb when the current tax rates expire that could result in a disaster for our economy.
American families and businesses, small and large, mired in a sea of uncertainty over the nation’s tax code, are cognizant that something must be done to address more immediate deadlines already baked into the system. Most folks–whether they have filed taxes as an individual, the head of a family or a business owner–understand that America’s tax code is a needlessly complicated maze. In many ways, it is the perfect representation of a bureaucracy gone mad. Annual compliance costs for individuals and businesses are north of $100 billion with six billion hours spent over the year calculating, compiling and filing tax returns.
Adding to that logistical nightmare are questions over what Congress will do to address specific tax provisions and the expiration of the 2001 and 2003 tax rate reductions. House Republicans believe we need a tax system that encourages private-capital investment, business growth and job creation. W have held numerous hearings on the subject and put forth proposals that would lower rates and broaden the base to make America and American entrepreneurs more competitive.
Does that mean getting rid of certain tax extenders or similar targeted tax provisions? It could under fundamental reform, so long as the code is made less burdensome and we are not simply responding to an inequitable tax code by rearranging the inequities to fit a political agenda. However, none of this should be done overnight and under duress.
That is why Republicans have committed to reviewing the tax extenders to determine what works. Those discussions should be open, honest and conditioned on a firm commitment to move forward with positive, principled, fundamental reform.
America’s tax code is a needlessly complicated maze.
For his part, President Obama has tried to steer the debate over tax reform away from the policy arena and into the political arena. We hear talk about the so-called “Buffett Rule” that will add another layer to an already burdensome, complicated tax code. There’s no credible economic or fiscal rationale for this idea. There is only a political rationale that is both destructive and divisive.
The Obama administration has released loose-knit ideas for corporate tax reform. Their plan would, among other things, reduce America’s top corporate tax rate– currently the highest in the industrialized world–from 35 percent to 28 percent while establishing a new minimum tax on foreign earnings of U.S. subsidiaries. He would also continue his policy of picking winners and losers in the economy by eliminating preferences for some and expanding them for others.
Inducing Job Creation
House Republicans have promoted a far simpler individual and corporate tax system that would lower the top rate to 25 percent for both businesses and families. This ensures that those small-business owners who file their taxes on the individual basis are not paying a higher rate than America’s larger corporations.
Tax reform that induces job creation must produce results that favor investment in the United States relative to other countries. In our globalized economy, the flow of capital has become increasingly mobile, while labor is still largely confined within borders. Reform–including any discussion about extending certain components of the tax code–must focus on encouraging investment of business capital in the United States and compelling businesses to start, to grow and to hire.
Right now the uncertainty of what is to come is only compounding the effect of our inefficient and noncompetitive tax code. If nothing is done, on Jan. 1, 2013, taxes will go up. In fact, it would be the largest tax increase in the history of our country. Aside from the president’s health care law that will soon take more out of wallets and business budgets, marginal rates that have been consistent for a decade will disappear leaving the current underperforming economy overwhelmed with a growing tax burden.
So we must bridge this gap lest our economy fall into greater turmoil. The House Ways and Means Committee has held hearings–including specific discussions about tax extenders–to move the debate and the conversation in a forward, positive direction. Our goal is to review and assess the value of all components of the tax code–from rate levels to targeted tax provisions to the tax treatment of corporate earnings, as well as interest and dividend income.
Getting the Economy Moving
The United States’ economy has weathered a storm of difficult challenges brought on by mismanagement in our financial sector and gross negligence on the part of government. Some have sought to expand government’s role in our economy by adding on new layers of bureaucratic dictates and higher taxes. This strategy is not working and will not work in the future. There is a better way. It begins by making sure our nation’s tax code complements the need for economic growth and rewards job creation. That’s our plan.
In the weeks and months ahead, House Republicans will continue to focus on getting this economy moving and more Americans back to work. We will ensure Washington does not ignore, for political purposes, what awaits us in January 2013. Our work will reflect our principled belief in that which has made us a great nation: economic freedom.
Congressman Tom Price, M.D. represents the Sixth District of Georgia. He serves as chairman of the Republican Policy Committee in the House of Representatives and is a member of the House Ways and Means Committee.