For the sake of economic and employment growth, tax reform needs to get done

Over the past three decades, while technology has liberated and empowered U.S. entrepreneurs and workers, America’s tax code has grown more complex and burdensome. It’s time to provide for comprehensive tax reform and relief that incentivizes the risk taking that is essential to economic, income and employment growth.

Our leaders in Washington have begun to pave the way for action on our tax system. Recently, the “Big 6” team of Republican tax reform leaders from the White House, Senate, and House released a joint statement saying that “there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base.”

{mosads}This is a positive stride for comprehensive tax reform, but significant policy advancements must take place for such action to benefit the American people and small businesses.

Our corporate tax rate is one aspect of our current system that especially needs attention. As it stands today, the corporate tax rate is one of the highest in the world. At 40 percent, including the average state rate, businesses are deterred from putting down roots in the United States, and instead are encouraged to investing and creating jobs overseas. For good measure, reducing and reforming the corporate income tax rate is not a “big business” issue. It’s very much about small business, as 86 percent of current C corporations employ under 20 people, and 96.7 percent employ under 100, based on the latest U.S. Census Bureau data.

However, reforming the way our businesses are taxed cannot simply end there. Since 95 percent of American businesses aren’t classified as C-Corporations, they pay the personal income tax. These businesses are forced to pay a ludicrous top tax rate of 42.6 percent on when the average state income tax rate is factored into the equation. That, again, is among the most non-competitive rates on the planet. Indeed, the personal income tax rate must be reduced and achieve parity with the corporate rate.

It’s also important that lawmakers understand that additional reforms are necessary, such as allowing for full and immediate expensing of capital expenditures for all businesses, which would incentivize higher levels of investment.

Given current tax burdens, along with assorted regulatory woes, it should surprise no one that SBE Council estimated in a recent analysis that there are some 3.4 million missing businesses in our economy, and that our economy has suffered a dearth in economic growth, investment, productivity, and job creation.

Just recently, the Small Business and Entrepreneurship Council sent a letter to Congress signed by over 50 small businesses across the country, that demonstrated the importance of broad tax reform to help spur small business growth and competitiveness. Indeed, lowering rates for all, vastly simplifying the system, and encouraging capital investment is vital to U.S. competitiveness and leadership in the global economy.

It is within reach of the president and Congress to provide considerable, lasting, and effective relief to small businesses that are the backbone of the American economy.  Allowing greater financial freedom via tax relief and reform would help the entrepreneurial sector of our economy to invest and innovate, thereby generating greater growth and job creation.

As House Ways and Means Tax Policy Subcommittee Chairman Peter Roskam (R-Ill.) noted in his opening statement at a small business tax reform hearing recently, “The tax code is not a natural disaster. It is not an immovable object. It is a problem that we created and that we can change just as easily.” It would be a tremendous mistake to not capitalize on this historic opportunity to make transformative changes to the nation’s tax code to help grow the American economy and small businesses.

Raymond J. Keating serves as chief economist for the Small Business & Entrepreneurship Council.

The views expressed by this author are their own and are not the views of The Hill.