House Republicans Continue Tax Reform Push

The United States’ is currently suffering through a cultural anachronism: We have more news than ever before, yet it provides less information than ever before. The result is that we’re constantly being bombarded with salacious narratives, not hard news.

Democrats, for their part, are basking in this strange political season. Rather than go toe-to-toe on new ideas, or even defend the results of their prior policy choices, they instead revel in innuendo and raise everything to the level of scandal.

That hasn’t stopped Republicans in Congress from engaging in the hard work of legislating. Although the news deigned to cover none of it, the House last week took action on a national defense bill that gave troops their biggest pay raise in history, they passed three more bipartisan initiatives to address the scourge of human trafficking, and they held another hearing on tax reform, this one aimed at identifying the struggles of small businesses.

Tax reform—the holy grail of policy initiatives—is happening, you just wouldn’t know it from watching television.

“[O]nce in a generation or so, there is an opportunity to do something transformational—something that will have a truly lasting impact long after we are gone,” House Speaker Paul Ryan said last month. “That moment is here and we are going to meet it.”

That moment has been long in coming. The last time tax reform was done was way back in 1986 when the oldest of the Millennial generation was still in diapers (and Speaker Ryan was just getting his driver’s license). The world has quite obviously changed over the last 31 years – computers, far more powerful than anything that existed, can now fit into something the size of a wrist watch; nearly any product in the world can be had with the click of a few buttons, and most of it can be on your doorstep in 48 hours; and we are on the brink of cars that drive themselves.

Everything has changed and evolved. Not our tax code. It has merely gotten bigger and more complicated. And, as a result, it has stopped working for taxpayers. Teresa Meares, a retired patrol officer who now runs a uniform and work apparel business, testified last week about the practical effects this has on America’s would-be job creators:

The complicated nature of the tax code led to misunderstandings and confusion. I lacked the ability to understand or use certain deductions in order to generate cash back into my company. As a result, I overpaid in taxes during those critical years when I needed cash flow to support the growth in my company. When I finally stopped and questioned why I had no cash, while having to pay so much back out, I had to spend $20,000 in legal and CPA fees to understand if I could or could not use certain items as a tax deduction … Having a simplified tax code that focuses on lower and straightforward tax laws would benefit and reward small business owners instead of scaring them away and penalizing those who cannot afford to hire a tax attorney/advisor.

Unfortunately, even the easily-understood parts of our tax code are actively holding back economic growth. For instance, 8 out of 10 businesses file taxes as individuals, which means they labor under a top marginal tax rate of 44.6 percent. The rest of America’s companies pay a corporate tax rate of 35 percent as compared to the average of 22.5 percent among other industrialized countries. Just across the border in Canada they pay a 15 percent rate.

That untenable, uncompetitive tax regime is made worse by our global tax system, which essentially double taxes businesses that sell internationally. Under that system, companies pay taxes in the nation where the goods are sold and taxes to the U.S. if they try to bring that money back to our shores for investment. Our tax code, which wasn’t built for a world filled with multi-national businesses, quite literally is incentivizing companies to keep their money elsewhere.

Nearly everyone agrees that tax reform must be done. Even Ron Wyden, the ranking minority member on the Finance Committee, describes the tax code as a “rotting economic carcass.” But, just as they are doing with Obamacare, Democrats are loath to jump into the fray. Rather than stand on the power of their ideas, they’re content to stoke the news’ latest firestorm.

That won’t stop Republicans.

“Yes, the defenders of the status quo—and there are many—are counting on us to lose our nerve, to fall back, or put this off altogether. But we will not wait for a path free of obstacles, because it does not exist,” Speaker Ryan recently said. “Transformational tax reform can be done, and we are moving forward. Full speed ahead.”