U.S. Rep. Chuck Fleischmann Column: Tax reform critical to U.S. growth

Tax reform, which had been the desire of now-U.S. House Speaker Paul Ryan, R-Wis., could be discussed in 2016.
Tax reform, which had been the desire of now-U.S. House Speaker Paul Ryan, R-Wis., could be discussed in 2016.

As we begin 2016, it is important to be grateful for the many blessings we have in this country and to remember the people in our current economy who are struggling. While the national employment rate has dipped to around 5 percent, the current economic growth rate has averaged a meager 2 to 3 percent over the past several years. During the slowest recovery on record, many workers have remained on the sidelines, and some have given up looking for work altogether. Others are working multiple jobs and countless hours but can't seem to get ahead. We can and must do better.

In late October, Paul Ryan, a tax police expert, became the new speaker of the House. The new speaker calls low marginal rates the "secret sauce" of economic growth, and he's made no secret of his intention to make reform his top priority as speaker. I believe this missing ingredient is the primary factor in our stagnant economy, and our efforts to reform the tax code are key to creating a stronger economy and more opportunity for everyone.

The U.S. currently has the dubious distinction of having one of the highest corporate tax rates in the world. At 39.1 percent, it is the third highest marginalized rate among the 34 countries in the Organization for Economic Co-operation and Development. This high rate forces jobs overseas, negatively affects markets and hurts our ability to compete.

The top rate on unincorporated small businesses is even higher at 44.6 percent. About half of all business income and employment in the private sector comes from businesses in this category.

The vast majority of businesses actually file their taxes as individuals. These small businesses include limited liability corporations (LLCs), sub-chapter S corporations and partnerships. Almost 70 percent of new jobs created come about as a result of expansion in this category. So it does not make sense to lower the corporate tax rate and fail to create a more competitive situation for small businesses. We must do both. Several of our global competitors have lowered their business tax rates to 15 percent. Instead of complaining about corporate inversion and calling for more stimulus, we need to address the current uncompetitive tax code.

The challenge of tax reform is creating a more competitive environment while reducing the deficit and paying down our massive debt. After President Reagan signed the Tax Reform Act in 1986, significant gains in GDP and income followed. The ideal tax code is simple, yet fair and efficient. Ours is a complicated mess. The large number of preferences, deductions and other narrow provisions in the code reduce the amount of revenue to the government while creating a large number of unnecessary complexities and inefficiencies. Decisions related to work, savings and investments are all negatively affected by the current system. The end result is slower economic growth, lower wages and fewer jobs.

To achieve the goal of lower rates, Ryan argues we must broaden the base by reducing or eliminating certain tax preferences. By simplifying the tax code and ending unfair preferences, we can create a more competitive environment, lay the foundation for a more vibrant economy, increase tax revenue and address our nation's crippling debt.

Comprehensive tax reform would be a monumental victory for the American people and our competitive position in the world. As we enter the new year, I'm hopeful our current Congress will move forward with the missing ingredient so critical to our economy.

Republican U.S. Rep. Chuck Fleischmann represents the 3rd Congressional District in Congress.

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