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Jim Tait 02/01-02/28/17

home : news : state news August 23, 2017

8/11/2017 7:25:00 AM
GOP poised for major tax reform push
vRyan: Fill out your taxes on a postcardcv

Richard Moore
Investigative Reporter


The GOP's bid to repeal and replace the Affordable Care Act has crashed and burned about as badly as the imploding Obamacare insurance market, but Republicans seem much more optimistic about the coming effort this fall to reform the U.S tax code.

President Trump is ramping up support, and House speaker Paul Ryan (R-Wisconsin) this week touted a poll showing the effort has broad public support.

Among other things, the survey by the American Action Network showed that 57 percent of people believe the personal income tax code needs to be overhauled or changed in a major way, including 66 percent of independents; a majority of Americans believe taxes are too high, including 46 percent of Democrats, 49 percent of independents, and 62 percent of Republicans; and nearly 70 percent of Democrats want their member of Congress to work in a bipartisan manner to get things done.

Ryan said this week those numbers aren't surprising, if people just think about the sense of dread they feel around tax season - the long complicated forms, the endless deductions, the seven different tax brackets, the uncertainty, the IRS.

Instead of a complicated and long 1040 form, Ryan said people should be able to fill out their taxes on a postcard, and he said it's not a stretch that Congress will finally get tax reform done later this year.



Particulars

In a June speech to the National Association of Manufacturers (NAM), Ryan discussed specific proposals for tax reform he said Congress would be considering, and he said the effort was long overdue.

"You may recall that the last time we did this was three decades ago - the same year I got my driver's license," Ryan told the audience. "Yes, a lot has changed since then. Our economy is more interconnected with the rest of the world than ever before. The Internet has transformed the way we do business and go about our lives."

But as the world changed, Ryan continued, our tax code has remained stuck in neutral.

"It has ballooned to 70,000 pages of rules and regulations that few people today actually understand," he said. "There is an old line about this: Our tax code is about five times as long as the Bible, but with none of the Good News."

Ryan said Trump recently introduced a set of principles for tax reform, and the House and Senate were working with the administration to turn those principles into what he called a transformational tax reform plan.

He took NAM members through the details of the GOP plan, starting with families and individuals.

"At some point along the way, our tax system started working for the tax collectors rather than the hardworking taxpayers," he said. "Look at what happens during tax season. I could describe the complexity of the code all day, but what really defines our tax code is that sense of dread that you feel. You know that feeling? You have to navigate long, complicated forms to file your returns. You need to wade through a seemingly endless amount of deductions and credits, each with its own rules and eligibility requirements."

And then, he said, after you tally up those deductions, you are placed in up to seven different federal tax brackets based on your income level. What you then hope for, Ryan said, is that you don't owe a whole bunch of money.

"You hope, because you do not really know ahead of time," he said. "How could you? This whole system is too confusing, and just too darn expensive. We have got to stop this madness. So let's start over."



What starting over means

Starting over, Ryan said, means eliminating harmful, burdensome taxes, including the death tax and the Alternative Minimum Tax.

"Next, we will clear out special interest carve outs and excessive deductions, and focus on keeping those that make the most sense: home ownership, charitable giving, and retirement savings," he said. "We will consolidate the existing seven brackets into three, double the standard deduction, and simplify things to the point that you can do your taxes on a form the size of a postcard. Wouldn't that be nice?"

Finally, and most important, Ryan said, savings gained by eliminating loopholes will be used to lower tax rates.

"Let me say that again," he said. "We are going to cut taxes."

Still, Ryan said, if the tax code is truly to be fixed, all of it has to be fixed, both for individuals and businesses.

"Why?" he asked. "Because this will create jobs. That is what this is all about: jobs, jobs, jobs. Good, high-paying jobs. As a matter of fact, the nonpartisan Tax Foundation has estimated that our blueprint would create 1.7 million new full-time jobs."

Right now, Ryan said, the U.S. has the worst business tax system in the industrialized world.

"Most people do not realize this, but here in America, eight out of 10 businesses file their taxes as individuals," he said. "In fact, most of our jobs come from these new and small businesses. And under our crazy system, successful small businesses pay a top marginal tax rate of 44.6 percent."

Manufacturing employs more than 12 million Americans, Ryan added, and adds more than $2 trillion to the economy every year, and the overwhelming majority of those companies are small businesses.

"At the same time, our corporate tax rate - for the rest of American companies - is 35 percent," he said. "To put this into a global perspective, overseas - which where I come from means Lake Superior - companies in Canada pay just 15 percent. Heck, the average tax rate on businesses in the industrialized world is 22.5 percent. Yet our corporations pay 35 percent and our successful small businesses pay 44.6 percent."

How can we compete like that? Ryan asked. But it gets even worse, he said.

"You see, the status quo encourages companies to move operations overseas, to make things abroad, and to then sell them back into the U.S.," he said. "This makes no sense, and it is costing us jobs."



Don't invest here

Ryan said America is one of the few countries in the world that actually discourages capital from coming back and incentivizes off-shoring jobs.

"This is not the kind of exceptionalism we should aspire to," he said. "Today, U.S. companies are leaving to become foreign companies, when it should be the other way around. We want foreign companies to become U.S. companies."

And so, Ryan said, the U.S. must think differently.

"We must think differently, so that once again we make things here and export them around the world," he said. "There are a number of ways to achieve this - we in the House have our own idea - and that is one of the things that we are discussing with the administration."

But the bottom line is, Ryan said, we must not accept a system that perpetuates the drain of American businesses overseas.

"My view is this: We should not just try to play catch up with the rest of the world," he said. "We should not just aim for the middle of the pack. Let's not accept following in any other country's wake. Let's be the best once again."

To do that, Ryan called for moving to what he calls a territorial system that reverses the trend of corporate inversions, and enables businesses to bring back cash stranded overseas without being taxed.

"Right now, if an American company makes money overseas, it gets taxed over there," he said. "But we also tax it again if the company tries to bring that money back to the U.S. Almost no other country does this. And as a result, it is preventing many companies from bringing that money home. They just keep it over there. It is literally stranding trillions of dollars that could come into our economy."

In addition, he said, real tax reform means slashing the corporate tax rate as low as possible.

"This means eliminating special-interest carve-outs and replacing them with lower tax rates for all businesses," he said. "And this means creating a new, lower tax, specifically for small businesses, so they can compete fairly, on a level playing field."

Finally, Ryan said, there was one last piece to the puzzle, and he said it goes back to the idea that all of this is about looking down the road, and planning for the future.

"These reforms - these tax cuts - they need to be permanent," he said. "Every expert agrees that temporary reforms will only have a negligible impact on wages and economic growth. Businesses need to have confidence that we will not pull the rug out from under them. They need the certainty from permanent tax cuts to hire more workers, invest in their businesses, and plan for the future."

Ryan said the GOP plan was ambitious, but it had to be.

"Now I know that the cynics and naysayers are out in full force," he concluded. "You will hear that tax reform is coming along. You will hear that it is dead. Then you will hear it is back on track. Then you will hear it is on life support."

Sometimes, Ryan said, all that would be said within one week and maybe in the same day or hour. But he encouraged Americans not to be surprised.

"I am here to tell you: We are going to get this done in 2017," he said. "We need to get this done in 2017. We cannot let this once-in-a-generation moment slip by. Yes, the defenders of the status quo - and there are many - are counting on us to lose our nerve, to fall back, or put this off altogether. But we will not wait for a path free of obstacles, because it does not exist."

Neither will the GOP settle for quick fixes and half-measures, Ryan said.

"Transformational tax reform can be done, and we are moving forward," he said. "Full speed ahead."

Richard Moore is the author of The New Bossism of the American Left and can be reached at www.rmmoore1.com.





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