Businesses, large and small, typically plan years into the future. Purchasing expensive, new equipment or opening a new store are not spur of the moment decisions, but are carefully thought-out and evaluated. A business must know if it has the cash on hand or credit standing to purchase the equipment, or pay the bills from the new store. During the 30 years I owned my roofing company, I didn’t take these types of decisions lightly because they didn’t just affect me, they also impacted my employees and their families who counted on me for their paychecks.
In my home state of Wisconsin, more than 90% of all businesses pay taxes at individual tax rates – inevitably linking business decisions with families. Families often decide whether or not to expand their businesses at the same dinner table where they decide if they can afford to put more money in their children’s college fund, buy a new car, or save a little more for retirement. I know this all too well from my days running my family's business.
Unfortunately, with tax and fiscal policy operating on a month-to-month, and sometimes week-to-week basis, businesses and families are forced to make decisions by estimating what the government will do next.
The National Federation of Independent Business recently released their Problems and Priorities Survey of small businesses across America. Two of the top five problems are related to uncertainty in the economy and surrounding government policy. Four of the top ten are tax-related, with “tax complexity” and “frequent changes in federal tax laws and rules” cited as the seventh and eighth highest-ranked problems. And twenty percent of these businesses reported taxes are their “single most important problem” on the survey.
Whenever comprehensive tax reform has been attempted it has seen bipartisan compromise. Both sides can find common ground in eliminating special interest loopholes and lowering rates across the board. These seemingly simple changes would result in a more efficient and equitable tax code that would not only create certainty, but also increase American competitiveness around the globe. Liberal Democrats and conservative Republicans have a history of finding areas of agreement to pass real tax reform, and there is no reason we could not do it again.
Just like more than a quarter-century ago in 1986, if comprehensive tax reform legislation were to be signed into law – Congress would utilize one of the most effective tools governments can wield to repair a broken economy: clarity in their tax code.
The more important and necessary outcome of comprehensive tax reform is certainty. When businesses have certainty they have confidence, which will boost economic activity and spur job creation. Instead of exhausting bad policies and traveling on worn-down paths, it’s time to go back to the drawing board and start anew. Our economic future depends on the growth of the small business sector, and sometimes going back to the basics is the best policy. When it comes to the tax code, I firmly believe that less is more and simpler is better.
Ribble represents Wisconsin’s 8th Congressional District and is a member of the House Budget Committee.