Taxpayers Need Real Tax Reform, Not Broken Promises

In the culmination of the fiscal cliff talks and despite what politicians said, taxes increased for all working Americans.  Now is the time for all taxpayers to join together and seize the opportunity to pursue the long overdue reform to our nation’s tax code.  Fortunately, some members of Congress agree and understand the need for change.  In a Politico op-ed from last week, Senator Rob Portman (R-Ohio) wrote, “Our tax code has become an obstacle to growth, and only a robust, growing economy can create the new jobs (and future tax revenues) that we need.”

Senator Portman also stated that, “Since 2001, taxes on everything from salaries and small business income to investment earnings and gifts have been temporary — a source of economic uncertainty and perennial fiscal fights. New permanent rates create a clear starting point for tax reform and end disputes over the baseline that have vexed past reform attempts.

Another problem with the shenanigans of the past several years is the significant uncertainty Washington’s game playing imposes on businesses.  With so many unknowns, businesses are cautious about making large investments (and creating new jobs in the process) for future gains because they lack any assurance that Congress won’t change the tax rates with its next whim.

Not only do our nation’s tax rates hurt consumers in the U.S., our nation’s businesses also confront a significant blow because the high tax rate they face places them at a competitive disadvantage abroad.  As the RATE coalition points out, “as of April 1, when Japan moved forward with its rate cut, the U.S. corporate tax rate became the highest in the industrialized world.” Senator Portman furthers this fact by noting that “as the Organization for Economic Development and Cooperation has reported, high corporate tax burdens are ‘most harmful to growth.’”

In addition to the uncertainty that plagues the business climate, job creators are also forced to confront “excessively high rates on business and labor income, a complex maze of tax preferences, and an outdated approach to American businesses competing for customers abroad.”  For these reasons and others, there’s no better time than the present to act and implement tax reform.

A coalition of tax reform advocates, Reforming America’s Taxes Equitably (RATE) explains some the benefits that will come from improving our nation’s misguided corporate tax rates.

RATE’s website lists a few of the results that will follow with an overhaul of our tax code.  A tax reform done right will:

• “Promote American competitiveness
• Increase incentives for companies to invest and create jobs in the U.S.
• Benefit both large and small American businesses
• Benefit U.S. workers and consumers.” 
  
  

If the goal is to raise revenue (not that Washington, D.C can be trusted with more of our money) then the best way to do this is not to increase current rates, but to lower rates, which will broaden the tax base by providing an incentive to invest and grow business.  With more people entering a thriving economy, the government will see an increase in revenue not because of higher taxes, but because there are more people to tax.  However, this is and should never be used an excuse to continue down Washington’s current trajectory of out-of-control spending.  Regardless of how much revenue is generated by lowering the tax burden, Congress needs to focus on real spending cuts.  Our nation’s economy will never be able to fully recover until Congress and this administration get their appetite to spend under control.   In the meantime, real and meaningful tax reform is critical to the long term financial health of the nation.