US in dire need for tax reform
Thirty-one years ago, President Ronald Reagan signed the Tax Reform Act of 1986, the largest tax reform and simplification bill in American history.
Since then, our country, global economics and the way the world does business have all changed dramatically while the U.S. tax code has failed to keep up. Without reform and simplification, the tax code will leave all Americans on an uneven playing field with the rest of the world.
Simply put, the U.S. tax code punishes people for doing business in America. The U.S. business tax is the highest in the industrial world at 35 percent, 10-15 points higher than the majority of our competitors. Because of high rates, the number of companies relocating overseas to countries that have lowered their tax rates has grown significantly.
The multinational companies that remain are faced with a steep tax penalty to bring revenue home, so U.S. worldwide businesses are holding $2 trillion in earnings and investments overseas instead of investing in U.S. communities and workers.
The impact on the economy isn’t just less income to tax. It’s the lost jobs and investments to other countries because our tax code has pushed them away.
Small businesses, the backbone of our economy, don’t have the same luxuries multi-national companies do.
While small businesses employ roughly half of all jobs in the U.S., their reward for chasing the American dream is being taxed as high as 44.6 percent and spending $46 billion in compliance costs nationwide.
Guy Berkebile, owner of Guy Chemical in Somerset, knows this all too well.
Even after all allowable deductions, his small business pays an effective federal rate of 37 percent. Because his company focuses on manufacturing, not the tax code, he has to pay an accounting firm $30,000 to keep everything straight.
Berkebile will be the first person to tell you the tax code is failing small businesses like his. He had to take out numerous loans and mortgages on his house — just to cover his taxes.
But it’s not just corporations, small businesses and everybody they employ being held back by the current tax code; all Americans are paying the price.
Nine out of 10 Americans rely on a professional tax preparer or software to navigate the complicated tax code, and individuals and families spend 2.6 billion hours and $99 billion each year filing individual income tax returns.
It’s estimated that the time spent on filing costs our economy $400 billion.
The extra layers of additional taxes make it increasingly harder to make it in America.
The estate tax, or “death tax,” punishes Pennsylvania farmers with a tax as high as 40 percent after a family member dies and their already-taxed income and property passes to their surviving family.
And after planning and saving for their futures, hard-working Americans can expect investment income to be subject to an effective tax rate that can be higher than 50 percent.
Right now is the greatest opportunity in recent history to pass pro-growth tax reform, and President Trump and Congressional Republicans aren’t letting it go to waste.
We’re taking on this challenge because all Pennsylvanians and small businesses like Guy Chemical deserve a simpler and fairer tax code that works for them, not against them.
Shuster represents the 9th District. You can find out more information about House Republicans’ plan at www.FairAndSimple.Gop.