RSC Members in the Media
Rep. Jordan: Transforming the Tax Code into an Economic Spark Plug
Rep. Jim Jordan (OH-04)
It’s nearly 4 million words, it’s complicated, it’s confusing and it’s costly. Families and businesses spend 6.1 billion hours a year trying to figure it out and $368 billion complying with it.
It’s the U.S. tax code.
You can tell a lot about a government by its tax code, and, in America’s case, ours indicates that Washington doesn’t understand how to keep an economy competitive on the world stage.
Given the facts, it’s hard to conclude much else. America’s entrepreneurs and companies are at a distinct disadvantage in today’s increasingly global market, with the second-highest corporate income tax rate in the developed world — almost double the global average — and high effective tax rates on capital gains on top of that.
In an annual report from the World Bank and others on the difficulty of paying business taxes, the U.S. now ranks 69th out of 183 countries. We’ve dropped 23 spots since 2009. That’s the wrong direction to be moving.
Through its complicated and burdensome tax code, the federal government is discouraging entrepreneurship and job creation at home and encouraging companies to take jobs and potential profits overseas. Sadly, this migration of American jobs to other countries will not be reversed as long as companies have major incentives to do their business abroad instead of here at home.
People often disparage Washington as being isolated from the rest of America, and for good reason. In some cases, this is harmless, yet when it comes to tax policy, what happens in Washington has a significant impact on the real world.
Common sense tells us that taxes should bring in a reasonable amount of revenue to fund a reasonable federal government, but our current situation is upside down. Our tax code isn’t reasonable — it is riddled with exemptions and loopholes that hurt those who are least able to navigate the maze and make it more difficult for our economy to recover. According to the nonpartisan Tax Foundation, compliance costs have actually doubled over the past decade, which means massive amounts of time, money and resources down the drain.
While the U.S. tax code is one of the biggest obstacles to job creation, it’s also one of our best opportunities to jump-start economic growth. Americans want a system that’s simpler, flatter and fairer, and our economy badly needs it.
One of the first steps America should take is to lower the tax rate for businesses from 35 percent to 25 percent. At the same time, we can eliminate loopholes to create a more level playing field. This would ensure that American companies are on equal footing with our global competitors.
We also need to reduce — or better yet, eliminate — the tax on repatriated profits. This would encourage companies to bring money made overseas back into the U.S. economy. We are one of the only major economies that taxes what domestically owned businesses earn in other countries. Because companies respond by keeping foreign-made profits overseas, we’re losing out on an estimated $1.2 trillion earned abroad that could be creating American jobs.
Ask any random gathering of Americans if they want to throw out the current tax code and start over. Just about every hand will go up. Most Americans support real tax reform that will create jobs by growing the economy, not the size of government, and support, on a bipartisan basis, ideas such as eliminating the death tax, Alternative Minimum Tax and the capital gains tax on inflation. These are common-sense measures that would help, not hurt, small businesses, family farms and working families.
Tax reform would empower entrepreneurs and promote a real recovery, one that will start putting our economy back on its feet.
While the debate over how Washington spends your hard-earned tax dollars will probably never end, the debate over fixing the tax code should already be over.
Online: The Dallas Morning News