Tax Reform

One of the least understood aspects of government – and one of the most impactful to our lives – is taxes.

Families are the fundamental building blocks of our society and economy. Sustainable economic and productivity growth simply cannot happen without stable families. Unsurprisingly, tax reform that delivers meaningful relief to middle-class families hinges on how much the child tax credit is increased.

President Trump and Republican leadership argue their tax proposal will significantly increase economic growth, but not add to deficits and debt load. They are wrong on both counts.

It appears that the proposed tax framework would eliminate the 104-year-old State and Local Tax deduction (SALT). This deduction allows families to deduct the amount they pay in state and local taxes from their federal tax burden; removing it would create a “double taxation” that would increase the burden on families and local businesses they visit.

It’s time to renovate the mortgage interest deduction. Homeowners who itemize their deductions receive this benefit. Under the proposed GOP plan, fewer households will find it worthwhile to itemize. Households making over $100,000 annually receive 77% of the subsidies.

On September 27, the administration and congressional tax-writers (The Big 6) released the Unified Framework for Tax Reform.

Since the establishment of the federal income tax in 1913, taxpayers can claim the state and local tax deduction, SALT, to avoid double taxation. If eliminated, millions will pay taxes a second time on the same income. Every local tax dollar for schools, public safety and infrastructure would additionally be taxed by the federal government.

This year we asked our member company executives to identify their top priorities for tax reform, and the answers were very clear.

The Trump administration’s tax framework makes tremendous strides towards fixing our broken tax system for the country’s entrepreneurs and middle class. The 40% tax reduction for pass-through small businesses will be a game changer – fostering a climate of broad economic expansion rooted in job creation and wage increases.

The reduction in corporate tax rates will provide an earnings boost to corporations with net deferred tax liabilities (AT&T) and penalize corporations with net deferred tax assets (Citigroup).

Republicans in Congress propose corporate and individual income taxes cuts. The plan lowers the top marginal tax rate, paid on incomes over $450,000, from 39.6% to 35%. Middle and moderate-income people would see little change in tax rates, but are likely to have slightly lower taxes as a result of the larger exempt amount. The corporate tax rate would fall from 35% to 20%.

Any tax reform that doesn’t focus primarily on boosting overall demand will be more symbolic than effective.

Individual

Republicans advertise their tax plan as a “middle-class” tax cut. The evidence says this is false: 80% of benefits would go to just the top 1% of earners, while taxes would increase for tens of millions of middle-class families. The bottom 20% of Americans would receive just $50 in tax cuts.

As we know, hurricane recovery takes more than a few months. In fact, the economic recovery after severe storms takes multiple years. That’s why the Main Street Growth and Opportunity Coalition is promoting tax reform to update our 30-year-old code.

The country is hungry for bold reforms to spur job and income growth, and tax reform is the best way to accomplish those for the American people. No one is defending the status quo, saying “I love the tax code. Please don’t change that!”

As Republicans on the Hill seek a pivot to tax reform, they have yet to provide any meaningful details. But their basic goal is clear – provide massive new tax breaks to the wealthy. This is the wrong path for our economy, the deficit and ordinary Americans.

It’s been more than 30 years since Washington enacted comprehensive tax reform. Now it’s on the agenda again.

With the modern world’s most costly and uncompetitive tax system, America is steadily losing ground – and good-paying jobs – to our global competitors. The time is now for bold, pro-growth tax reform.

My dad woke up at the crack of dawn almost every morning to build a farm large enough so his kids could farm together one day. When he died unexpectedly, that American Dream was put into jeopardy by the death tax.

It’s no secret our international tax system is outdated and hinders American companies’ ability to compete. But it also poses a risk to our tax base, as other countries have modernized their systems and are rapidly attracting American businesses and jobs. It’s also the reason why over $2 trillion is locked out abroad, because of how we tax offshore income.

An old Indian Chief once said, “The success of a rain dance depends a lot on timing.” That’s especially true of enacting major legislation such as tax reform.

Our outdated tax code needs fixing, but this won’t be accomplished by passing the buck to consumers – which is just what the proposed Border Adjustment Tax would do.

1986 Tax Reform was challenging.

As a veteran of the 1986 Tax Reform Act, I’ve been asked the about differences between then and now. The biggest difference is in how everyone viewed what we were doing. We were just doing our jobs.

After failing to repeal Obamacare, the GOP is pivoting to tax reform. The House tax reform blueprint has dominated discussions, but other tax reform plans are in the works.

As much as $767 billion is owed by American corporations on $2.6 trillion in untaxed profits stashed offshore.

It has been more than 30 years since policymakers reformed the federal tax code. And since that time, high marginal tax rates for businesses have discouraged investment and encouraged profit shifting.

One: Lower America’s 35% corporate income tax rate to 20%, or even 15%, so we can compete with the OECD average of 23%. (The average state corporate income tax is above 4%). Lower the seven individual rates to 12%, 25% and 33%.