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[This is part of an ongoing series entitled “The Case for Tax Reform,” which examines the importance of reforming the outdated tax code, and how achieving that goal will advance economic growth, jobs, and prosperity.]
It’s over. I’ve had it. This just isn’t working out, Internal Revenue Code. We’ve tried and tried. I just need a real Code. I need a Code that is more competitive, more pro-growth. It’s been 31 years and, for all the reasons below and more, I’m moving on. Done. Finito.
1. High Rates
The United States has the highest marginal corporate tax rate among the 35 industrialized countries of the OECD. Our successful small businesses are facing even worse with combined federal and state marginal rates close to 45%. I know being number one is great at the Olympics, but in the world of tax rates, well, it’s basically the worst. We can do better – American families and businesses deserve it.
2. Internationally Uncompetitive
As I’ve noted before, we are the last member of the major industrialized OECD countries still clinging to your anti-competitive worldwide system of taxation we adopted in the 1980s. It’s time to reject this antiquated system of taxation. Much like we said goodbye to 1980s staples like disco, shoulder pads, acid washed denim, and mullets, we need to jettison your 1980s worldwide tax system and level the playing field with a competitive territorial system of taxation that fits with our 21st century global economy.
3. Slow Cost Recovery
I’m looking for the most pro-growth tax code out there and you know what’s not helping? Cost recovery periods that are too long. Under your current rules, if I buy a computer, you say it depreciates over five years, even though, realistically, it’s a paper weight after two. Longer asset lives are not only unrealistic but they increase the cost of capital investments. We need a system that offers all facets of pro-growth policy – and that includes faster cost recovery.
4. Overly Complex
“When I started my business, I dreamt of complying with a tax code totaling almost 4 million words, that requires more than 8.9 billion hours annually to comply with filing requirements, and that costs the U.S. economy $409 billion a year,” said no one ever. American taxpayers need a code that is less onerous and that doesn’t waste valuable resources on compliance burdens.
Who knew that the immortal words of 1980’s musical sensation Whitesnake could be so applicable to our current tax code? “I don't know where I'm going, but I sure know where I've been...” seems to perfectly convey that businesses, due to both the temporary nature of some business tax provisions as well as the unclear timing and content of tax reform, sure know how bad the current code is but have no idea what to expect next. This uncertainty in the tax code makes business planning a nightmare. The solution? Again, in the wise words of Whitesnake, “I've made up my mind, I ain't wasting no more time” – in other words, the time is now to act on comprehensive, pro-growth permanent tax reform that brings the certainty businesses need.
So, as you can see, Internal Revenue Code, I’m done with you. I’d love to say that this has been a great 31 year run, but, to be honest, this break up is long overdue. Oh, and by the way? It’s not me, it’s you. You are hindering growth, investment, and competitiveness, so I am trading you in for a better code; a code with its act together.