Sen. John Thune
To understand why the economy was such a big issue in the 2016 elections, we need look no further than the fact that Americans have basically not had a raise in eight years. Thanks in large part to a sluggish economy, real wage growth has averaged a paltry 0.25% per year since the recovery began in 2009.
Over the eight years of the Obama Administration, yearly economic growth averaged just under 1.5%. That’s far behind the average of other post-1960 recoveries, and things are not improving. Right now, the nonpartisan Congressional Budget Office is projecting average growth of just 2% for each of the next 10 years. In other words, we’re looking at long-term economic stagnation.
But there’s good news. Stronger economic growth is within our reach, but it’s going to require some changes in Washington. One of the most important of those changes is reforming our broken tax code, which has become a constant drag on economic growth.
Under our current tax code, some corporations benefit from special rules, deductions and credits, while others are forced to pay the highest corporate tax rate in the developed world. Our tax code puts American businesses at a competitive disadvantage—leading many companies to move overseas. And if they move, American jobs often go overseas with them. Meanwhile, small businesses aren’t creating new jobs because they’re struggling under a combination of high tax rates and burdensome regulations.
This, of course, has real consequences for American workers. It’s difficult to find a job when new businesses are not starting and existing businesses are not expanding, or when the tax code encourages businesses to create jobs abroad instead of here at home. Real tax reform is long overdue, and Republicans are committed to enacting a bill this year.
So what should tax reform look like? For businesses, tax reform needs to accomplish several goals. First, it needs to make sure that U.S. companies are competitive in the global marketplace and aren’t being forced to move overseas. A large part of that will involve lowering our nation’s excessive corporate tax rate, moving to a more competitive international tax system to level the playing field for U.S. companies, and allowing businesses to benefit from their capital investments faster. We also need to make sure that startup businesses aren’t choked off by our tax system before they’ve even had a chance to get off the ground.
Above all, small businesses and family farms, which are often forgotten when we talk about tax reform, must be a priority. These Main Street businesses are responsible for substantial new job growth in this country and a tremendous amount of innovation. Despite this, taxes are frequently more burdensome for them than for some corporations. Any meaningful tax reform has to address this disparity.
Getting our economy growing again at a healthy rate is one of the most important things we can do to help Americans who have been left behind in this economy. Economic growth means job growth. It means wage growth. It means opportunity growth.
An increase of just one percentage point in projected economic growth for the next 10 years would have significant results for hardworking Americans. Average incomes would increase by an estimated $4,200. We would see an estimated 1.2 million more jobs. And the standard of living would double twice as fast. Tax reform can help us get there.
In addition to freeing up businesses to grow and create jobs, another key part of tax reform is providing tax relief for individuals and families. Families’ tax burdens are too high, and rates need to come down. It’s also important that our tax code recognizes the financial challenges of parenthood and lends a hand to moms and dads doing the tough job of raising the next generation. Through a combination of lower rates and greater economic growth, we can ensure that hardworking families have the resources to do more than live paycheck to paycheck, as so many are doing right now.
Finally, any tax reform must substantially simplify the tax system. We cannot afford to undo the economic benefits of tax reform by forcing individuals and employers to waste billions of hours and spend billions of dollars to comply with the tax code, as is the case today. That time and money should go back into our small businesses and back to families for things like education and retirement savings.
We have a real opportunity this year to reform our tax system so that it benefits all Americans and supports, not hinders, economic growth. Republicans in Congress are committed to working with Democrats to finalize a comprehensive bill. Hardworking taxpayers deserve a system that works for them and allows our country to compete and win. That’s the kind of tax code we plan to give them.