Tax Reform Key to Vibrant NH Business Environment

This article appeared in the New Hampshire Union Leader on March 6, 2016

According to exit polls, the economy remains a top concern with three-quarters of both Democrats and Republicans expressing concern. As well it should be. While recent jobs reports provided some encouraging news for the nation, more must be done before we can turn the page on a chapter of recent history marked by anemic growth and a sluggish economic outlook. One of the biggest warning signs of a sputtering economy was a disappointing 0.7 percent growth in the economy in the last quarter of 2015.

If President Obama truly wants to leave a legacy behind and remove obstacles in the way of a healthy, vibrant business environment (as he pledged in his State of the Union address), he and his Capitol Hill counterparts have a golden opportunity to make real progress toward that goal by passing comprehensive tax reform.

The U.S. tax code has become a complicated mess of loopholes, selective exemptions and sky-high rates. In fact, the United States has the highest corporate tax rate in the world at more than 39 percent, putting our competitiveness at risk. Meanwhile, the average tax rate worldwide has fallen seven points to under 23 percent.

And, at more than 74,000 pages, the American tax code has become unnavigable for many businesses, especially small businesses, which often lack the resources of their larger competitors to stay in compliance. This is particularly significant for New Hampshire’s small businesses that in 2011 employed half or more than 282,000 of the state’s private workforce.

Simplifying the tax code and a commitment from lawmakers and the President to do so is the blueprint to ease some of American consumers and businesses’ financial woes and increase economic growth. Congressional leaders have already raised concerns that America’s tax code is woefully out of date and in need of simplification, with House Speaker Paul Ryan leading the charge.

Speaker Ryan has noted that Canadians tax small businesses at 15 percent whereas the United States’ top tax rate on successful small businesses is more than 44 percent. America will further undermine small businesses’ pursuit to compete effectively if this tax rate remains exceedingly high. What’s now needed is a bipartisan effort in Washington to prioritize tax code simplification to make sure small businesses can fairly compete to innovate and grow their services.

It’s important to note that any pursuit of tax reform should be executed in a way so that government does not pick winners and losers in the American economy. Unfortunately, this is exactly what the Obama administration and Senate Democrats have done when they called for a repeal of tax deductions on traditional oil and gas companies under the misguided notion that these deductions are allegedly subsidies on the industry.

We should be clear about this: a subsidy is a direct payment from the government, while deductions are in place to ensure companies are taxed only on their real incomes. The oil and gas industry take deductions, they do not receive subsidies. Our lawmakers should take care to base their rationale for policy decisions under the proper definitions. Doing so would avoid forcing the energy industry to pay punitive taxes, and will demonstrate the government’s interest to treat all sectors of the economy equally.

This year will mark the 30th anniversary of the Tax Reform Act of 1986, the last time the tax code was reformed. Americans’ livelihoods, and our country’s prospects for prosperity, can be realized through pro-growth, industry-neutral reforms to our nation’s tax code. This objective is a policy priority that the President and Sens. Jeanne Shaheen and Kelly Ayotte can and should support.