What does this mean? It means that instead of investing in new jobs and innovation, U.S. businesses are investing time, energy and resources to avoid paying taxes. It means that instead of hiring people to build things, businesses are hiring lobbyists to secure more specialized tax breaks and loopholes to lower their tax burden. It means that the tax code is now so complicated that instead of making it easy for businesses to set up shop, the U.S. tax code requires every entrepreneur to have an accountant. And it means that instead of encouraging investment in the U.S., the U.S. tax code is encouraging U.S. companies to invest in other countries where taxes are lower.
The U.S. tax code is clearly in need of reform.
It's been done before. In 1986, a Democratic House majority joined forces with President Ronald Reagan and a Republican-led Senate to overhaul the federal tax code. There was no precedent for that coalition, but there is one today.
Joining forces against special interests, Democrats and Republicans sent the president sweeping bipartisan legislation that eliminated numerous tax breaks and
loopholes to streamline the code and hold down rates for everyone, without any additional government spending.
More than 6.3 million new jobs were created in just the two years that followed the '86 reform. That is more than double the number of jobs created during the full eight years that followed the Bush tax cuts of 2001.
Senator Dan Coats, a Republican from Indiana, and I have offered reform legislation modeled on the 1986 effort that we believe can make U.S. businesses more competitive with their global counterparts and encourage investment in U.S. workers. We have been working together to advance the Bipartisan Tax Fairness and Simplification Act and with the budget crisis throwing into sharp relief the pitfalls associated with other remedies in Washington, we believe the time is ripe for the
same kind of bipartisan, comprehensive tax reform we saw almost three decades ago.
What became clear from the 1986 effort was that lower marginal tax rates--the tax rate on the last dollar of income earned--did more for the economy as a whole than
special tax provisions or sweetheart deals.
Our bill wipes out dozens of these giveaways and lowers the corporate tax rate for everyone, from a global high of 35 percent down to a competitive 24 percent. That will boost American businesses' ability to compete, plain and simple.
The Wyden-Coats bill eliminates the tax break for shipping jobs overseas but gives U.S. corporations a one-time tax holiday to repatriate profits currently held offshore, helping them transition to the new tax system. In addition to the low flat corporate rate, this will help make the U.S. a more attractive place for both U.S. and foreign businesses to invest.
But tax reform can't stop with the corporate tax code.
The vast majority of American businesses pay taxes under the rules of the individual code so corporate tax reform alone will do nothing for the thousands of sole proprietorships, partnerships, and LLCs that make up the backbone of the U.S. economy. We need comprehensive tax reform that simplifies the corporate and the individual code at the same time so that no U.S. business or taxpayer is left out.
Tax reform can create a simpler, more business-friendly tax code that increases tax revenue without raising tax rates. It can lower corporate tax rates to make American businesses more competitive, which will help businesses to create jobs that pay middle class wages. Tax reform can also make tax filing less taxing for
None of this is going to be easy. When the drum beat for reform picks up, every special interest and lobbying firm in the city will be working overtime to protect the tax breaks they hold dear. But if Congress is serious about creating jobs, there is no better place to start than tax reform.