It doesn’t take a recovering tax attorney like me to tell you what you already know: the federal tax code is a mess, especially for businesses. Every day, business owners and managers express frustration at the complications and hassles of an unnecessarily complex tax code — and fear that a mistake could cost them big. This is no way for a government to treat its citizens, or its businesses. It’s time for Congress to get serious about tax reform.
Most Republicans and Democrats agree that the current tax code is prohibitive to economic growth. The statutes themselves are so complex — and sometimes even contradictory — that they create a disincentive to people even to get into business, and represent a major cost category when and if they do. Our tax code makes finding success much harder for would-be and current business owners than it should, which in turn creates a major drag on economic growth.
Additionally, our corporate tax rate is far, far too high. Not many people realize that our corporate tax rate is actually the highest in the developed world (yes, even higher than France).
This means that U.S. companies and business owners must compete against foreign companies while shouldering much greater regulatory and tax cost burdens. That they can even compete at all is a testament to U.S. grit and ingenuity.
All of this money — the administrative burden created by too-complex taxes, as well as unnecessarily-high corporate tax rates — would be much better spent on new facilities or ventures, hiring new workers, or giving back to local communities, rather than being paid to the inefficient federal government or to attorneys and accountants to comply with the byzantine tax code.
Thankfully, there is some hope on the horizon. Recently, the chairman of the tax-writing committee in the U.S. House of Representatives distributed a draft tax reform plan that would make taxes lower, fairer, and simpler for U.S. businesses.
This is a very welcome development. For too long, U.S. businesses have been clamoring for meaningful tax reform, while Congress has repeatedly ignored this problem. The current plan in the House is by no means perfect, but it is designed to generate bipartisan support and represents a great start to a conversation that we must have, and must have now.
If we truly want the economy to grow at a robust rate, and if we want to see unemployment finally return to pre-recession levels, tax reform is the best way to do it. Allowing business owners to better utilize more of their profits and simplifying the tax code would translate into one of the greatest stimulus events in our history.
Unleashed from ruinous tax rates and a punishing (and punishable) tax code, business owners would be free to do what they do best: fill gaps in the economy, grow, hire workers, and bring prosperity to communities across the country, including here in Kentucky. That’s the kind of tax environment we all can get behind.
It’s been about 30 years since we last undertook a major overhaul of the U.S. tax code. U.S. businesses cannot wait any longer. Members of Congress need to put their partisan fights aside and make this happen for the American people.
Lower, fairer, simpler taxes for everyone — especially small businesses — is exactly what the economy needs to hit its stride after languishing in anemic growth and high unemployment for the better part of a decade.
Trey Grayson previously served as Kentucky’s Secretary of State and is the Director of the Harvard Institute of Politics.