A rare opportunity for tax reform

The American economy is in a funk. We are seeing the slowest economic growth since 1949. Millions of able-bodied Americans are no longer in the workforce. College graduates are struggling to repay student loans in a brutal job market. Older Americans are putting off retirement because they haven’t saved enough.

Welcome to the new American economy. Millions of people are living on the edge. An alarming 29 percent of all adults have no savings set aside for emergencies.

{mosads}It doesn’t need to be this way. There is reason to hope that new policies in Washington can turn the economy around and restore jobs and opportunity. Chief among these is sweeping tax reform to lower high rates on individuals and businesses and simplify a complex tax code that no ordinary person can decipher.

For the first time in 30 years, we have a rare and golden moment to reshape the tax code and bring prosperity back to America.

In 1986, President Ronald Reagan undertook the last sweeping reform of the tax code, and in the years that followed, our economy grew, the unemployment rate dropped and the federal deficit shrank.

We can achieve this success today. Earlier this year, Republicans in the U.S. House produced a fundamental tax reform plan that includes my proposal to ensure that mom-and-pop businesses never face a higher tax rate than large corporations. Economists at the nonpartisan Tax Foundation estimate that adopting this tax plan would create 1.7 million new jobs and economic growth of 9.1 percent over the next decade.

To achieve growth, our tax code must support the engine of our economy: small business. The 28 million American small businesses are responsible for two-thirds of all new jobs created since the 1970s. When these firms grow, more people get jobs. 

But the vast majority of small businesses currently face higher top tax rates than big corporations, which puts Main Street at a huge disadvantage compared with Wall Street. Corporations are taxed at a 35 percent rate, while small businesses pay taxes at the individual rate of 39.6 percent. When state and local taxes are figured in, some small businesses can pay more than half of their income in taxes.

That’s why tax reform needs to include the simple principle laid out in my Main Street Fairness Act: No small business should ever have to pay a higher tax rate than the biggest businesses in our country. When we unleash the power of America’s small businesses, which account for nearly 60 million jobs, by taxing them fairly, our economy will get a huge boost.

The bill will establish that businesses that file taxes as so-called passthroughs, such as sole proprietorships, partnerships, LLCs and S corporations, will never pay a higher rate than a corporation. According to the Tax Policy Center, about 93 percent of small businesses are organized as passthroughs. That means nearly all small businesses will finally be able to compete on a level playing field if my proposal is enacted. 

The National Federation of Independent Business is the latest group to announce its support for my bill. Others include the National Association of Manufacturers, Associated Builders and Contractors, the National Retail Federation, Americans for Tax Reform, the Florida Chamber of Commerce and Florida TaxWatch.

But simply lowering rates is not enough. The U.S. tax code is complicated, unfair and punitive. At almost 4 million words, the tax code is five times longer than the King James Bible. Americans spend 6.1 billion hours per year trying to make sure that they pay their taxes correctly.

The cost of all that wasted effort? Nearly $170 billion. Imagine if all this time, money and energy were put into job creation and getting Americans back to work.

I’m pushing hard for Congress to make tax reform a top priority under the new presidential administration in January.

It’s painfully obvious that the tax code isn’t working for most people, so let’s bring Washington together to fix it.

Rep. Vern Buchanan represents Florida’s 16th District. He is a senior member of the House Ways Committee and is the co-chairman of the bipartisan Florida delegation.