It has been more than 30 years since Washington fundamentally redesigned the federal tax code. The great Ronald Reagan was president, and according to the seminal book on the 1986 tax rewrite, "Showdown at Gucci Gulch," that successful tax reform effort was years in the making.
There is a good reason why comprehensive tax reform is so difficult: There are far too many sacred cows that live within our monstrosity of a tax code. Meanwhile, job creators face some of the highest tax rates in the entire world. As our economic competitors have reduced taxes, America has fallen behind by simply standing still. We have hobbled through the weakest economic recovery since World War II.
Imagine if Congress could solve this massive burden facing hardworking taxpayers and put a fix on the desk of President Trump before the holidays. They can, if they learn from the lessons of the past months and the attempts to repeal ObamaCare.
Simplicity is key. Not only would our tax code benefit from simplicity, but the efforts to pass pro-growth tax cuts would as well. Because hardworking taxpayers need to be protected instead of simply shifting the tax burden through revenue-neutral tax reform, it is time for real tax relief at the federal level.
After repeated ObamaCare fixes were mired in the clay of political complexity, tax relief can avoid the same depressing Beltway fate and give hardworking American taxpayers a much-needed win in 2017.
The plan that will provide real results for hardworking taxpayers is providing significant deficit-neutral tax cuts to boost economic health. Citizens directly gain the benefit of a lower tax burden through greater economic growth, greater wealth creation and less micromanagement of personal decisions.
When proponents of tax cuts tie themselves to the false notion of revenue neutrality, they ensure tax increases and complexity are included in the package. Thus, they create too many economic losers in the process. Deficit-neutral tax relief combines budget prioritization and tax cuts in a win-win formula that also reduces government waste.
What would a significant net tax cut mean for job creators? A recent poll conducted by Job Creators Network shows how tax cuts for small businesses directly benefit hard-working citizens. A majority of small businesses would reinvest tax cuts back into their business and employees through capital investments, wage increases, new hiring and expansions. Furthermore, nearly half of small business owners responded by saying a tax cut is the policy reform that would help their business the most.
For years, states have lead the way by providing substantial tax cuts. Federal efforts should follow the lessons learned from successful tax relief efforts at the state level. These case studies show that substantial tax relief yields a healthy economy, job growth and greater take-home pay. In the past year alone, nine states significantly reduced taxes, according to the annual American Legislative Exchange Council (ALEC) report, State Tax Cut Roundup. In 2015, 17 states provided substantial tax cuts. All told, in the past four years, nearly 30 states have significantly reduced their tax burdens.
North Carolina provides a clear example of the benefits of pro-growth tax cuts and budget prioritization. After significant tax cuts, the Tar Heel State led the nation with 13.4-percent growth in its GDP from 2013 to 2015. Over the last 10 years, North Carolina has attracted more than 500,000 new residents on net from the other 49 states, earning the economic vitality, social capital and tax revenue from these new taxpayers. North Carolina, with America’s third best economic outlook, serves as a textbook example of what pro-growth tax relief can do for an economy.
All Americans — Republicans, Democrats and Independents — can agree on this: We deserve better results from our federal government, and we need more economic growth. Instead of falling into Washington’s infamous complexity trap, which for years has led many good policy reforms into the graveyard, now is the time to provide taxpayers a simple policy fix that will provide real tax relief and restore the health of the American economy.
Jonathan Williams is the chief economist of the American Legislative Exchange Council (ALEC) and the vice president of the Center for State Fiscal Reform. Williams also authors ALEC's annual Rich States, Poor States study on state economic health.
The views expressed by contributors are their own and not the views of The Hill.