Tax reform helps small businesses like mine
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As Congress moves to axe taxes, the American people should understand why tax cuts are imperative. The phrase “tax reform” has been repeated by Democrats and Republicans for years, but many Americans have lost sight of the reason to pursue it: The U.S. tax code is stuck in the past, which has reduced opportunities for families and small businesses.

The 70,000 pages of the current tax code is far too burdensome and complex. President Ronald Reagan understood that lower taxes benefit all Americans, so he prioritized “lowering everyone’s tax rates” to provide “a greater incentive to climb higher, to excel, to help American grow.” The Tax Reform Act of 1986 accomplished it by reducing the top marginal individual income tax rate from 50 percent to 28 percent, in addition to dropping the corporate income tax rate from 46 percent to 34 percent.

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That was more than 30 years ago. Since then, technology has changed the world forever. Cell phones did not exist, let alone Facebook and Twitter. Globalization also connects the world in a way thought unimaginable in the 20th century, as American inventions find their way to the most remote parts of Africa and Asia.

But the federal tax code has remained largely the same. The U.S. corporate tax rate still surpasses 30 percent, the highest in the developed world, and foreign profits are double-taxed. In other words, U.S. businesses are currently taxed on the profits they earn in a foreign country and again when they bring the money back to the United States. Taking double taxation into account, American corporate income is actually taxed at more than 55 percent, putting U.S. businesses at a major competitive disadvantage.

As it stands now, these businesses have kept $2.1 trillion overseas to avoid being double-taxed on their foreign profits—money that could be invested in business expansion and job creation but currently isn’t.

At the same time, countries like Ireland—which has attracted significant U.S. business in recent years—boast a corporate tax rate of only 12.5 percent.

The solution to the problem is a modernization of the tax code. The Tax Foundation found that a reduction in the corporate tax rate from 35 percent to 25 percent would increase gross domestic product (GDP) by 2.3 percent, while a drop to 15 percent—still more than Ireland’s rate—would boost GDP by 4.3 percent. Depending on the size of the reduction, it would also create as many as 613,000 new jobs.

Fortunately, President Trump is pushing Congress in the right direction. The White House and Republican leadership are currently negotiating a corporate tax reduction to 15 percent or 20 percent, in addition to substantial tax relief for U.S. small businesses. 

The latter is long overdue. America’s 29 million small businesses created millions of jobs around the country. In Michigan alone, there are more than 866,000 small businesses, which employ 1.8 million workers—50 percent of the state workforce. Small businesses also account for roughly 90 percent of Michigan’s exports.

But these job creators are crushed by the current tax code. According to the National Federation of Independent Business, two-thirds of small business owners believe taxes are too high, while even more (85 percent) claim the tax code is “too complex and should be overhauled.” 

It’s time for Congress to work with President Trump and resolve a decades-old issue in order to enhance opportunities for all Americans. Only if the tax burden is addressed can business thrive. And only if business thrives can working Americans reap the benefits.

Brian Ellis is the owner of Brooktree Capital Management in Michigan.

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