U.S. Sen. John Thune (R-S.D.), a member of the tax-writing Senate Finance Committee, today outlined several key principles for pro-growth, comprehensive tax reform, which includes increasing wages, jobs, and economic growth; providing tax relief for the middle class; keeping well-paying jobs in the United States; increasing American competitiveness in the global economy; and simplifying the tax code.
Thune’s remarks (as prepared for delivery):
Thune has already introduced several tax-related bills, all of which would be prime measures to be included in a comprehensive tax reform package. To learn more about these bills, visit Thune’s tax reform site.
“Mr. President, it’s no surprise that Americans consistently rate jobs and the economy as top issues of concern.
“A recent survey found that 50 percent of voters consider themselves to be living paycheck to paycheck.
“And about one-third of voters say they are just $400 away from a financial crisis.
“That means a single unexpected car repair or health care bill could easily put them in the middle of a financial emergency.
“Too many Americans have seen their American dream dim in recent years.
“Hopes for a secure future have turned into worries about where the next rent or mortgage payment is coming from or whether it will be possible to save anything at all for retirement.
“But, Mr. President, we don’t have to resign ourselves to the status quo.
“We don’t have to accept the long-term economic stagnation of the Obama administration as our economic future.
“We can get our economy going again, and we can set it up for strong growth for the long term.
“But that is going to require some work.
“It’s going to require repealing burdensome and unnecessary government regulations that have slowed economic growth.
“And it’s going to require reforming our complex, outdated tax code, which is increasingly strangling our economy.
“Mr. President, the tax code might not be the first thing people think of when they think of economic growth, but it actually plays a huge role in every aspect of our economy.
“It helps determine how much money Americans have left over from their paycheck to save or invest, or whether or not they can afford a car or a house.
“And when it comes to businesses, it can be the key to determining whether or not a young business gets off the ground or an existing business has the money to grow and hire new employees.
“Unfortunately, our current tax code is not helping our economy.
“It’s doing the opposite.
“It limits Americans’ opportunities.
“It punishes their success.
“It discourages investment and growth.
“It cripples small businesses.
“It encourages large businesses to send jobs overseas.
“And it keeps our economy from reaching its full potential.
“Reforming our tax code is an indispensable part of getting our economy back on the path to long-term health.
“Without comprehensive tax reform, the economic stagnation of the Obama years is likely to become the status quo going forward.
“This fall, Mr. President, Republicans in the House and Senate are going to make comprehensive tax reform a priority.
“And any legislation we pass will be governed by five principles:
“First, any bill has to result in increased wages, jobs, and economic growth.
“Second, it must provide tax relief for the middle class.
“Third, it has to keep well-paying jobs here at home.
“Fourth, it has to increase American competitiveness in the global economy.
“And finally, it has to simplify the tax code.
“Republicans will be talking a lot about these principles over the coming weeks.
“But today I’d like to take a few minutes to talk about the first of these principles – making sure that tax reform legislation increases wages, jobs, and economic growth.
“Flattening wage growth has been a problem in the United States for decades.
“And during the eight years of the Obama administration, wage growth was almost nonexistent.
“Economic growth was also weak throughout the Obama administration.
“During the last year of the Obama administration – years after the recession ended – economic growth averaged a dismal 1.5 percent.
“That’s barely half of the growth needed for a healthy economy.
“And while things have been looking up a bit lately, we still have a ways to go to get back on the right track.
“Things still need to get better – and get better faster.
“And we want things to get better for the long term.
“During the Obama administration, there were periods of reasonable economic growth – but they were quickly followed by weak periods.
“That’s not good enough.
“We need to put our economy on a strong, healthy footing for the long term.
“So what does the tax code have to do with all of this?
“How is it discouraging wage growth, job growth, and economic growth?
“Well, Mr. President, I want to talk about three big ways it’s discouraging growth.
“To start with, tax rates on businesses large and small are too high.
“Our nation has the highest corporate tax rate in the industrialized world – at least 10 percentage points higher than the majority of our international competitors.
“And small businesses face tax rates that can range even higher – up to 44.6 percent.
“Now, it doesn’t take an economist to realize that high tax rates leave businesses with less money to invest.
“Less money to spend on wages.
“Less money to create new jobs.
“And less money to put back into new property or equipment for their businesses.
“And this situation is compounded when you’re an American business with international competitors who are paying a lot less in taxes than you are.
“It’s no surprise that U.S. businesses struggling to stay competitive in the global economy don’t have a lot of resources to devote to creating new jobs and increasing wages.
“And on top of our high business tax rates, there’s another major problem with our tax code that puts American businesses at a competitive disadvantage globally: our outdated worldwide tax system.
“What does it mean to have a worldwide tax system?
“It means that American companies pay U.S. taxes on the profit they make here at home, as well as on any profit they make abroad, once they bring that money home to the United States.
“The problem with this is twofold.
“First, these companies are already paying taxes to foreign governments on the money they make abroad.
“Then when they bring that money home, they end up having to pay taxes again on at least part of those profits, and at the highest tax rate in the industrialized world.
“This discourages them from bringing their profits back to the United States to invest in their domestic operations.
“Instead, our tax code gives them a strong incentive to leave that money abroad and invest it in foreign workers and economies.
“The other problem is that most other major world economies have shifted from a worldwide tax system to a territorial tax system.
“In a territorial tax system, you pay taxes on the money you earn where you make it, and only there.
“You aren’t taxed again when you bring money back to your home country.
“Most of American companies’ foreign competitors have been operating under a territorial tax system for years, so they’re paying a lot less in taxes on the money they make abroad than American companies are.
“And that leaves American companies at a disadvantage.
“These foreign companies can underbid American companies for new business simply because they don’t have to add as much in taxes into the price of their products or services.
“Mr. President, in addition to discouraging growth with high tax rates and with our outdated worldwide tax system, there’s another major way our tax code discourages growth.
“And that’s by leaving small businesses with very little cash on hand.
“I’ve mentioned the high tax rates small businesses face, which already restrict their cash flow.
“Well, the accounting rules in the tax code just compound that problem.
“Under current law, small and medium-sized corporations are often required to pay tax on income before they receive the cash and cannot deduct all of their expenses when they pay the invoices.
“It can take years or even decades for them to recover the cost of their investments in equipment and facilities.
“For instance, right now, the cost of a computer is recovered over five years, tractors over seven years, and commercial buildings over 39 years.
“The consequence of deducting investments over so many years is that businesses can be left extremely cash-poor in the meantime.
“And cash-poor businesses don’t expand.
“They don’t hire new workers.
“And they don’t increase wages.
“Mr. President, any bill Republicans consider has to fix these elements in our tax code that are discouraging growth.
“It has to lower rates for businesses large and small.
“It has to shift our outdated worldwide tax system to a territorial tax system, so that American businesses are not at a competitive disadvantage in the global economy – and so that American businesses have an incentive to invest their profits at home in American jobs and American workers instead of abroad.
“And any bill we consider has to address the cost-recovery rules that are keeping small businesses cash-poor – often for years.
“I’ve already introduced legislation to help startups and small to medium-sized businesses recover the cost of their investments faster – legislation that I hope will become part of the final bill we consider in the Senate.
“I’m looking forward to working with Chairman Hatch and my colleagues on the Senate Finance Committee as we work to draft the final bill.
“The American people have had a rough few years, but economic worry doesn’t have to become the status quo for the long term.
“American workers and job creators are as dynamic and creative as ever.
“We just need to clear the obstacles from their path.
“And comprehensive tax reform will allow us to do that.
“I look forward to helping to bring the American people real relief this year.”