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One Step Closer to Tax Reform

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One day after voting to prevent a massive tax hike from hitting small businesses and families, House Republicans also took action to reform the entire tax code. It's not just high tax rates that discourage businesses from growing. The very structure of the tax system is so complex, inefficient, and unfair that the United States is becoming one of the worst places to do business in the developed world.

Businesses have certainly taken note. Although 17 of the world's 20 largest companies were based here in 1960, the number was down to just six by 2010. Our misguided system essentially penalizes companies attempting to do business both here and overseas by taxing their earnings twice, and at exceptionally high rates. We recently passed Japan to have the highest corporate tax rate in the developed world. At 39.2 percent, our corporate tax rate is more than 50 percent higher than the average rate of member states of the Organization for Economic Cooperation and Development (OECD). It's no wonder employers take a look at our tax policies and decide to start or relocate their business elsewhere.

Small, locally owned businesses may not pack up and move to another country, but their capacity to hire and expand is severely limited by the financial and bureaucratic hardships imposed by the tax code. Small businesses spend an average of $74 per hour just trying to comply with overly complex requirements -- the most expensive paperwork headache they manage.

Saddling our most reliable job creators with such outrageous obstacles is highly counterproductive. Two-thirds of the jobs created during the past 15 years have come from small businesses, yet about 50 percent of small business profits are taxed at the top two highest rates -- the very brackets most likely to see tax hikes if President Obama gets his way. As the National Federation of Independent Business (NFIB) points out, "The businesses most likely to face a tax increase by raising the top two rates are businesses employing between 20 and 250 employees. According to U.S. Census data, businesses with between 20 and 299 workers employ more than 25 percent of the total workforce."

We need a tax system that encourages job creation and economic growth, not one that forces Americans to spend more than 6 billion hours and $160 billion per year trying to understand it. Tax reform does not have to be a lengthy, difficult process. The House-passed legislation implements an expedited process, specifying that a tax reform bill must advance to a vote on the House floor within days of its approval by the tax policy-writing Ways and Means Committee. The bill also establishes a process to ensure that consideration will not be blocked or delayed by the Senate's 60-vote cloture threshold.

After 42 straight months of 8-plus percent unemployment, we can't afford to wait any longer on comprehensive tax reform.


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