A vote on this week's budget resolution will be a vote for or against tax reform

A vote on this week's budget resolution will be a vote for or against tax reform
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When senators vote later this week on this year's budget resolution, they are voting to support or oppose tax reform.

While in years past the budget has been largely a visionary document, in 2017, the budget is the vehicle for tax reform. Support for this budget equals support for tax reform, while opposition means opposition to tax reform.

Passage of the resolution will allow a tax cut of $1.5 trillion over the next decade, giving families and businesses the tax reduction they need. It will also unlock tax reform that leads to drastic simplification and strong economic growth resulting in new or better jobs and higher wages. 

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Failure to pass the budget will mean tax reform stalls and perhaps, the best opportunity to pass comprehensive tax reform in 30 years will be missed.

 

To get tax reform, Congress must use budget reconciliation, which avoids a Senate filibuster as almost every Senate Democrat has already ruled out supporting Trump’s tax reform plan. 

At the start of the year, Republican lawmakers promised they would achieve two core conservative issues — repeal of ObamaCare and passage of pro-growth tax reform.

More than nine months into the year, neither goal has been achieved leaving Republicans with few victories to point to. Ahead of 2018, Republican lawmakers still have an opportunity for a win by passing tax reform.

While detailed legislation still needs to be developed by the committees of jurisdiction, senators have an opportunity next week to show they are serious when they say they support tax reform by voting for the FY 18 budget resolution.

A vote for the budget resolution should be considered a vote for the many reforms proposed in the tax framework.

On the individual side, the tax framework reduces taxes for all and simplifies the code.

The existing seven tax brackets are folded into three brackets of 35, 25, and 12 percent. The plan also doubles the standard deduction to $12,000 for an individual and $24,000 for a family. Under this plan middle and low-income families see strong tax reduction, especially for those in the current 10 percent bracket, whose tax rates drop to a zero percent rate.

The tax plan also increases the child tax credit so that families have more freedom over their own income, and repeals distortionary deductions, in addition to the Alternative Minimum Tax that only adds to the complexity of the code. 

On the business side, the tax reform plan will ensure that businesses large and small are able to compete and thrive. Under this plan the economy will grow so that more (and better) jobs are created, and families have more take home pay.

Today, the U.S. has some of the highest business tax rates in the developed world. The 35 percent corporate rate, for example, is the highest, while businesses organized as pass-through entities pay a top rate of almost 45 percent. In comparison, businesses operating in the rest of the world pay rates closer to 25 percent, while the European average is just 18 percent. 

The Republican tax reform framework addresses this by lowering taxes on all businesses by 42 percent — the corporate rate is lowered to 20 percent while the pass-through rate is lowered to 25 percent.

The plan also moves from a worldwide system of taxation to a system of territoriality so that trillions in after tax income can be reinvested in the economy. Under the current system, American businesses are double taxed on income — once when it is earned in the country where business is done and again when it is brought back to America to be reinvested. Ending this double taxation will give a booster shot to the stagnant economy.

The tax plan will also help grow wages by encouraging more investment in the economy through 100 percent full business expensing for the next five years. This reform will simplify the code and remove a barrier to investment. More investment in the economy means more jobs and higher wages.

The tax reform framework released by the administration and Congress is pro-growth and pro-family. It will result in tax cuts for all, drastic simplification, and stronger economic growth.

However, without a budget resolution, none of the reforms in this framework can become law.

Support for tax reform is unanimous amongst Republicans, and by passing a budget resolution that unlocks tax reform, Republican senators can prove their commitment to tax reform.

Alex Hendrie is the director of tax policy at Americans for Tax Reform, a non-profit group that works to support limited government.