In the coming days and weeks, our elected leaders in Washington, D.C. have the chance to do something bold to improve the lives of all Americans, dramatically boost job creation and raise take-home pay for working families.
Passing historic tax reform would deliver such immense benefits to U.S. workers that the opportunity should bring together Republicans and Democrats, the White House and Congress, in a shared effort to help the American people.
{mosads}In that spirit, we have brought together two of the largest sectors of America’s economy — manufacturing and retail — to help our elected leaders seize this once-in-a-generation opportunity. We don’t agree on every detail. But we are setting aside our differences to promote tax reform that will benefit American workers and businesses.
Together, our industries generate trillions of dollars in economic output and employ millions of workers — more than any other industry sector. But frankly, many of our businesses are suffering, and our workers are hurting. America’s tax code is a big part of the problem.
Republicans and Democrats agree that our tax code puts the United States at a competitive disadvantage. Around the world, our top competitors have lowered tax rates and modernized their tax codes, giving them a strong edge in attracting jobs and new business.
The last serious tax reform in the U.S. was passed in 1986. It was even hailed by The New York Times as a “prime example of how the American system of government gets things done.” But over the past 31 years, rates have been raised, loopholes have been inserted and complexity has been added.
Where have we found common ground?
First, we believe tax reform should include a bold reduction in the country’s corporate tax rate. At 35 percent, U.S. corporations face the highest statutory tax rate among the advanced economies in which they compete. To stay competitive, we need to get down to at least the 20 percent rate that is being considered, or closer to the 15 percent that was originally proposed.
Our high corporate tax rate has also suppressed the wages of U.S. workers. According to research by the National Retail Federation (NRF), our corporate tax code costs the average U.S. worker $4,690 in lost wages.
A significant rate cut would either increase wages by as much as $97 billion or support the creation upwards of 1.5 million new jobs. It would also provide much-needed relief to U.S. consumers, who play such a critical role in powering our economy.
Second, we must reduce taxes for small businesses, many of which are organized as entities like partnerships, LLCs and S corporations. Small businesses employ more than half the workers in the U.S. Our tax code needs to reflect the critical role small businesses play in our country’s economy, as well as their need to compete on an international scale.
Third, lawmakers should modernize our international tax rules. Most advanced economies have adopted a “territorial” system, and the U.S. should do the same so that American companies are not double taxed when they bring home money earned overseas.
If U.S. companies cannot compete abroad, where 95 percent of the world’s consumers are located, the U.S. economy suffers from the loss of both foreign markets and the domestic jobs that support foreign operations.
So far, the legislation proposed in Congress would help achieve these goals. In addition, the plans include incentives for productive, job-creating investments in new plants and equipment. The plans also include middle-class tax cuts, which help working families and spur the growth of our economy.
A 2015 study from the National Association of Manufacturers (NAM) showed that a comprehensive tax reform package along these lines would add more than $12 trillion in U.S. GDP, create more than 6.5 million jobs and increase investment by more than $3.3 trillion over a 10-year period.
The tax reform ideas supported by NRF and the NAM would generate tremendous benefits for the three main pillars of the U.S. economy: workers who build things, retailers who sell things and consumers who buy things.
Let’s set aside our differences and seize this opportunity to pass the tax reform our economy desperately needs. The millions of workers we represent will be watching closely to see whether our leaders in Washington stand with us.
Matthew Shay is president and CEO of the National Retail Federation. Jay Timmons is president and CEO of the National Association of Manufacturers.