Tax reform: The great equalizer for business and economy booster

The president and congressional leaders recently unveiled a much-anticipated tax-reform plan and deserve credit for pushing tax reform. From Presidents Kennedy to Reagan, tax cuts have had a positive impact on the U.S. economy and tax receipts collected by the government. Tax-reform bills have recently been approved by both the House and the Senate, and now both versions of the bills need to be reconciled into one for final passage before being sent to President Trump for his signature.

Meaningful tax reform, as noted by a recent survey of American business leaders, will be positive for the nation’s economy. Capital investment, hiring and sales are all expected to increase, according to Business Roundtable’s survey of chief executives published earlier this year.

Here are a couple of highlights from the tax package:

The House version reduces personal tax brackets from seven brackets to four. The Senate version keeps all seven.

The House bill lowers the tax rate on pass-through business income to 25 percent, or 9 percent for lower-earnings firms. The Senate bill gives a 23 percent deduction to pass-through income. This provision is important for family-run and -owned small businesses, and Congress needs to equalize this tax treatment to Subchapter S companies and treat them as a normal corporation. Otherwise, their shareholders’ earnings would be taxed at a much higher rate, which was surely not the intention when Congress established this type of corporation for family-run businesses.

For corporate taxes: Both the House and Senate bills propose to cut the corporate tax rate from 35 percent to 20 percent; however, the House version would be effective in 2018, and the Senate version would delay implementation until 2019.

Our country has a whopping $20 trillion national debt, an increase from $5 trillion in 2001. (During President George W. Bush’s term, the national debt went from $5 trillion to $10 trillion and during President Barack Obama’s, term it soared to $20 trillion.) We must reduce this debt by economic growth and reduced spending.

First-quarter gross domestic product this year was a paltry 0.7, which was later revised to 1.2. By comparison, it has been above 3 for the past two quarters. All while the stock indexes are at an all-time high, there are risks to our economy and tax reform/cuts are much needed. Second-quarter GDP growth was at 3.1, and the third quarter was at 3.3 — highs we have not seen in years, which were in part based upon anticipated tax and regulatory reform being approved by Congress.

Trump’s plan to lower the corporate tax rate will make our country much more competitive; it will be a win for our economy and our competitive position with other G-20 nations. In most rankings, the United States has the highest corporate tax rate. Adopting this plan will only strengthen our nation’s economy and global position.

A reduction of the corporate tax rate will also help stimulate hiring of more employees and increase businesses’ investments in infrastructure and technology. Those investments will have positive ripple effects on the economy. As an example of what a tax-reform bill can do to help the economy: For every $100,000 in tax savings realized by a bank, it can lend an additional $1 million to homeowners and businesses to stimulate the economy.

A plan that equalizes the tax playing field for businesses — not only with global competitors, but also here at home — will help strengthen American companies. Government should not be picking winners and losers; it should treat all industries the same.

For example, tax loopholes of large credit unions and the farmcredit system should be closed. A family of four should not pay more in taxes than a billion-dollar credit union. In order to pay for tax cuts, Congress will have to take steps to end corporate welfare for some industries. Mom-and-pop credit unions should continue to enjoy their tax-exempt status, but large credit unions, which are multibillion-dollar financial institutions, do not pay for the needs of our country.

The Wall Street Journal reported a year ago that small-business start-ups are down 25 percent in the past six years. A tax-reform package, if approved by Congress, would be the best stimulus to strengthen our economy and get more monies back out to job creators and business builders.

Passage of a tax-reform bill would meet the needs of both Main Street and Wall Street, and will move this economy upward.