Congress has focused on reforming our healthcare system for good reason: Americans face real problems as a growing number of insurers cease to offer policies and insurance prices climb. Repealing and replacing the Affordable Care Act could ease families’ financial pressures, help people get the medical care they need, and even boost our economy.
Tax reform is just as urgent. The White House and congressional leaders want swift action and recently said in a joint statement "the time has arrived" to draft legislation that will cut tax rates "as much as possible" for corporations and individuals.
This is great news for Americans.
The harm caused by our tax code isn't as easily identified as cancelled insurance policies or huge increases in deductibles and premiums, but it's also very real. And done right, tax reform will create important benefits for Americans.
Better Job Opportunities and Upward Pressure on Wages
Our official unemployment rate is relatively low, but too many Americans are underemployed or working in jobs that aren’t helping them climb the economic ladder. Tax reform can change that.
In fact, corporate tax reform has the potential to be a boon to workers. Many mistakenly assume that reforms that reduce the tax burden on businesses only impact business owners and wealthy investors, but, in reality, workers and consumers would be among the biggest beneficiaries. Studies show that the bulk of the money that businesses save from lower tax liabilities end up in workers’ paychecks.
We all have an interest not only in helping workers earn more, but also in making U.S.-based companies more competitive internationally. The current corporate tax rate of 35 percent is among the highest in the world, putting our companies at a competitive disadvantage and encouraging more businesses to take their operations overseas. Simplifying the corporate tax code to broaden the tax base and lower the rate would be a win for workers and the economy as a whole.
More to Spend and Save
A lot will depend on the exact details of the tax package, but taxpayers can expect to be paying less in taxes after reform. In fact, estimates of President Trump’s proposed plan found that the typical middle class family would save about $1,000 each year on taxes.
Not only would families pay less in taxes, their earnings are expected to increase. A study from the Tax Foundation found that reducing tax rates could create 1.7 million new jobs over the next ten years and raise wages by nearly 8 percent. That means families will have more room in their budgets today as well as to save for college costs, a home, and retirement.
More Time and Less Stress
Taxes aren’t just too high, they are too complicated. Americans waste time, energy and money just trying to figure out what they own. According to the Office of Information and Regulatory Affairs, the average American devotes approximately 27.5 hours preparing his or her individual income tax return. The cost of navigating all that red tape for totals $409 billion.
Even worse, many still fear they may have made a mistake leaving law-abiding citizens worried about penalties if audited by the IRS. It shouldn’t be so hard to follow the law. Reforming taxes to simplify the tax code will mean Americans waste fewer hours and less money on tax filings, freeing up those resources for more valuable pursuits. And they will have the peace of mind of knowing that they’ve met their obligations as good citizens.
Tax Reform, One Step at a Time
Our tax code needs a top-to-bottom overhaul. But the good news is that tax reform doesn’t have to happen all at once. Congress might not be able to agree on the best way to correct every problem and eliminate every complication, but they should be able to make real progress and eliminate a lot of the dead weight in our tax code, which would have a big payoff for our economy and the American people. Congress may have to revisit the issue again next year, and even the year after that, but the time to start is now.