Column: Seize opportunity for tax reform
There are many things to love about spring — breezy weather, Opening Day, freshly bloomed flowers, and everything else that makes this season so wonderful.
One spring tradition, however, gives citizens across the nation headaches: Tax Day. Because of the current tax code, Michiganians must sort through piles of complicated and time-consuming forms, or pay an expensive professional tax preparer to help, simply to file their taxes.
Luckily, there is a better way forward. For the sake of American taxpayers, here in Michigan and across the country, Congress must take action and pass comprehensive tax reform for the first time since the Reagan era.
Before examining the options that are on the table for reform, it is important to understand the issues plaguing the tax code. As has been highlighted multiple times by our presidents, the United States has the highest corporate tax rate in the industrialized world at 35 percent. For comparison’s sake, Ireland’s stands at a hyper-competitive 12.5 percent. That the process of “inversion,” in which American companies move headquarters overseas to avoid burdensome regulation, has become a major issue in recent years is directly related to our burdensome corporate tax code and rates.
Along with the unnecessarily high corporate tax rate, the tax code is incredibly difficult and time consuming for American taxpayers to handle, especially small businesses. The statutes contain 3,951,104 words, which is more than five times the length of the King James Bible. It is estimated that Americans collectively will spend between 6.1 billion and 8.9 billion hours filing taxes, including nearly 2 billion hours handling the 1040 form alone. Very few American citizens would consider themselves “tax experts,” yet the tax code is designed as if they are.
Fortunately, there is hope for rectifying these issues in the current tax code. The proposed tax reform blueprint — “A Better Way” — does a great deal to address the issues mentioned above. The tax plan proposes lowering the corporate tax rate from 35 percent to a much more reasonable 20 percent. This would promote economic competition for U.S. businesses and provide incentives for companies to keep their headquarters — and jobs — in the United States.
Additionally, the plan looks to shrink the tax filing form to the size of a “post card,” saving Americans a great deal of time, effort and money. Experts estimate that the plan would increase wages nationwide 7.7 percent and create 1.7 million full-time equivalent jobs. In the Wolverine State alone, the proposed blueprint would create 50,337 full-time equivalent jobs and provide an estimated $4,716 gain in after-tax income for median households.
The world was a very different place when the United States last enacted comprehensive tax reform — Ronald Reagan was president, “Top Gun” was tops at the box office, and a gallon of gas cost less than a dollar.
Today, there is a golden opportunity for tax reform and a promising blueprint on the table with which to proceed. The code hinders business and weighs American taxpayers down with confusing forms. For the sake of Michiganians, American citizens, and American businesses, Congress should take advantage of this opportunity to give the current code a much-needed update.
Lew Dodak, a Democrat, and Rick Johnson, a Republican, are former Michigan speakers of the House.