By Sen. Rob Portman
Our tax code is too complicated, too burdensome, and out of date -- and it is no wonder.
America's last major tax overhaul was in 1986. Back then, Ronald Reagan was president, a gallon of gas cost 86 cents, and Pete Rose still played for the Cincinnati Reds. The simplification and lower tax rates in the 1986 reform law gave our economy a needed shot in the arm in the 80s and 90s, and after 31 years, it is time to do it again.
A broken tax code has contributed to America's weak economy for the past decade. Tax rates have gone up and loopholes have grown while other countries have gone in the opposite direction. This has put our workers and companies at a disadvantage.
While our economy has seen some improvement recently, many hardworking Ohioans are still not feeling the benefits. Too many families are facing the middle-class squeeze of stagnant wages and higher cost of living. Smart, pro-growth tax reform is key to getting those wages up.
The tax reform proposal I am working on helps Ohio working families. The plan benefits the middle class in three important ways.
First, it helps the family budget by cutting middle-class taxes. Our tax framework will double the standard deduction, essentially creating a zero tax bracket for the first $24,000 earned by families and $12,000 by individuals. Two-thirds of all Ohioans use the standard deduction, and this will result in them keeping more of their hard-earned money.
Second, it will expand the child tax credit to help families with kids afford childcare.
Third, it will simplify and adjust tax brackets so folks who are beyond the standard deduction and who don't take advantage of the child tax credit get tax relief. In addition, we will protect tax incentives enjoyed by the middle class for things like home mortgage interest, charitable contributions, and retirement security.
Our plan will also lower taxes on small businesses and corporations so they can reinvest in their workers through more jobs and better wages. I have met with small-business leaders in Cincinnati and around Ohio as we developed this plan, and they agreed that a simplified tax code with lower rates would give our economy the boost it needs.
The United States has the highest corporate tax rate in the industrialized world. For 31 years, foreign countries have lowered their corporate taxes to attract new businesses and create jobs and, unfortunately for American workers, it has done just that. Since 1986, our competitors have lowered their corporate tax rate by an average of more than 19 percent. Other countries have moved ahead, taking U.S. businesses with them -- and the result has left our workers behind.
Since 1998, the number of U.S.-headquartered companies on the Forbes 500 list has declined by more than 25 percent. Some of this has been caused by inversions, where U.S. companies move their headquarters overseas for tax purposes, and some has been caused by foreign acquisitions of U.S. businesses.
Either way, when headquarters leave the U.S., jobs go with them. A recent study by Ernst & Young suggests that since 2004 we have lost 4,700 companies that would still be U.S. companies today if we had a 20 percent corporate tax rate. Loss of jobs and investments overseas is unacceptable, and it has to change.
In the past, making U.S. businesses more competitive and providing middle-class tax cuts have had bipartisan support, and I hope they do again.
We have the opportunity to bring jobs and industry back to America -- and create more jobs and better wages. A recent study by the nonpartisan Congressional Budget Office estimates that as much as 70 percent of the benefit from a lower corporate tax rate will go to workers in the form of better wages and benefits.
In addition to lowering our rates, we also have an opportunity to reform our international tax code to encourage bringing profits and investments back to America. There is between $2.5 trillion and $3 trillion of earnings locked out of America that could be brought back here to expand businesses, create jobs, and get the economy moving. This is a huge opportunity for us.
We have a chance to enact once-in-a-generation tax reform that will re-open the American economy as the best place in the world to do business, create more jobs and better wages for our workers, and give middle-class Ohioans more money in their pockets. It's time for Washington to listen to the American people and fix our broken tax code.