The president’s vision focused on letting Americans keep more of their own money. Done rightly, this vision can unleash robust economic growth that will benefit all Americans.
America is suffering under the current tax code. It features high rates and endless complexity for most Americans while providing untold opportunities for a privileged few.
The rich can afford accountants and lawyers to navigate the code’s bureaucratic morass while every other American merely files their taxes and hopes for the best.
The president’s vision for a simpler tax code that allows the economy to grow can be realized through four key reforms.
1. Allow full expensing.
The United States has an outdated and overly complex system that makes it near impossible for businesses to deduct the full cost of investments. This current system artificially raises the cost of investing by denying the full deduction, resulting in slower wage growth and less job creation.
Full expensing would allow businesses to deduct all investment expenses from their taxable income immediately, such as the cost of new office space needed to hire additional workers. This simple change could grow the economy by more than 5 percent over 10 years by removing the current tax bias against investment.
It would also greatly simplify tax paying, as businesses would no longer have to track investments over many years for tax purposes—a requirement that costs businesses over $23 billion annually.
The benefits of expensing are not just for large corporations. They are accessible to all businesses, big and small. Expensing must be a primary component of any tax reform plan that emphasizes economic growth and job expansion.
2. Lower the corporate income tax rate.
The United States has the highest corporate tax rate in the developed world, with an average combined federal and state rate of almost 40 percent. Compared to China’s 25 percent or Ireland’s 12.5 percent, the U.S. offers one of the least attractive tax business environments in the world.
Lowering the corporate tax rate to the president’s previously proposed 15 percent and no longer taxing profits earned overseas would largely even the playing field, allowing U.S. firms to compete with foreign firms.
Though it may seem counterintuitive, the burden of the corporate income tax falls almost entirely on workers in the form of lower wages.
Businesses invest money in their workplace so that their employees can be more productive. Part of this investment involves paying higher wages to employees who are able to become more productive. But high corporate taxes discourage this kind of investment in the workplace, thus killing the potential for workers to earn higher wages.
On the flip side of the coin, American households would share in the benefits of a corporate rate cut through higher wages. A corporate tax cut helps all Americans.
3. Lower tax rates for individuals.
To allow Americans to keep more of their own money, tax reform must lower tax rates for individuals. In addition to...
Read More HERE
No comments:
Post a Comment
Test Word Verification