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One of the great things about the American political system is the chance to hit the reset button. For better or worse, every two years a new Congress is sworn in. New members come to Washington with new ideas – some more sensible than others – but nevertheless, this biennial tradition brings with it renewed hope. That’s why we’re so excited for 2017 and the soon-to-be-sworn-in 115th Congress.
At various points over the last three decades, Congress has flirted with reforming our tax code but was never quite successful enough with this on-again/off-again relationship to be able to call it an exclusive courtship. Disparate bills of all stripes and sizes were put forth, all with a singular connective tissue: none could garner the support needed to be considered a viable proposal. But 2017 looks different. By all accounts, Congress and the new administration are serious about tackling tax reform next year.
The global marketplace is creating untold opportunities for American businesses. Ninety-five percent of the world’s consumers live somewhere other than the U.S., and American companies are adjusting to these market realities by selling their goods both here and abroad. Unfortunately, these same companies are hamstrung by an antiquated tax system that gives a leg up to foreign competitors. For example, our corporate tax rates are among the highest in the world; repatriating foreign-earned profits would be silly, if not impossible, thanks to high rates and the threat of double taxation; inventors aren’t championed like they should be; and American companies encounter too many hurdles when they try to move capital between jurisdictions. In short, our current tax code isn’t designed for a 21st century global economy.
If Congress and the new administration are serious about bringing about sweeping tax reforms, there are a few things they must keep in mind as they begin to outline legislation. Specifically, effective tax reform legislation for today’s economy should:
American ideals like entrepreneurship and hard work have made us the global innovative hub, but absent long overdue changes to our tax code, the U.S. could cede this mantle to another country. As the new administration and 115th Congress get settled into Washington, it is our sincere hope that they are successful in crafting and implementing broad and effective tax reforms. American ingenuity and growth are depending on it.