Spring Clean the Tax Code or Spring Clean the Current Administration?
I know I heard someone say BOTH, and I certainly can’t disagree. After all, the tax code didn’t get so onerous and convoluted by itself. It was revised so many times by politicians, sometimes for the better, and oftentimes self-serving. It’s past time for serious tax reform.
One of the primary problems now is the high corporation income tax rate. It’s no wonder the United States is having a very difficult time competing in the international markets. Forget the hype and propaganda spewed about by the white house, our country is suffering from subpar economic growth. Furthermore, our long term growth potential is bleak, and will continue until we elect leaders that will focus on tax reform that will promote long term economic growth.
Tax Reform is Needed to Compete Internationally
We no longer live and compete in a local market. With the current technological advances, practically every country is competing in the world arena. Other nations that have good leadership realize what they must do to compete in the international market. Intentionally placing U.S. firms at a strong disadvantage in attracting world consumers, illustrates the short sighted, and yes, incompetent leadership that we have.
[bctt tweet=”Do we all agree that tax reform is needed? To what degree?” username=”HBSMoneyTips”]
Serious tax reform is needed because of the deficiencies in the present tax code. I would suggest that, at a minimum, tax reform should include three primary criteria.
The first, and very important, should be a permanent and lower corporate tax rate. This would help to return the United States as a strong competitor for international business.
Another part of tax reform would be a permanent change in the way we treat earnings overseas. Probably using a regional style method to eliminate, or at least substantially reduce taxes, on repatriated earnings would be successful.
Finally, another permanent change would be to broaden the current tax base. This would be required to curtail the economic distortions that would occur when reducing rates, and especially in tax reform in general.
However, until the broken tax code is changed to a pro-growth prominence, our three proposals are flawed in a number of ways. They must be a significant part of tax reform that has a primary focus on pro-growth.
There are currently two proposals being considered to pay for highway spending. One is to levy another tax on earnings overseas and another is to have a standalone tax holiday as a financing gimmick to generate these funds. Once again, this administration demonstrates their short sighted approach by using a band aid, and temporary fix to solve a problem. They must instead, be looking to strong, long term economic growth by beginning tax reform NOW.