Over the past year, Congressman Roger Williams (R-Texas) has introduced several pieces of legislation that together should serve as a model for pro-growth, conservative tax reform.
This package of legislation lowers individual and business income tax rates, reduces the capital gains tax and FICA/self-employment taxes, creates 100 percent, creates a 5 percent repatriation rate to bring back profits stranded overseas, and promotes pro-growth accounting methods.
ATR supports Rep. Williams’ legislation and urges all Members of Congress to support and co-sponsor each and every bill.
Reduces Individual Income Taxes
H.R. 2842, the “Individual Rate Simplification Act,” simplifies the tax code by folding the top five tax brackets into two brackets – a new top bracket of 30 percent for any income over $1 million, and a 20 percent bracket for income below the $1 million threshold. The existing 10 percent and 15 percent brackets are kept in place at current levels to ensure that no Americans see a tax increase.
Reduces Business Taxes
H.R. 2946, the “Incentivize Corporate America Act,” reduces the top corporate tax rate to 20 percent. At 39 percent, the U.S. corporate rate is currently far above the average corporate rate of the developed world which is just 25 percent. As much as 70 percent of business taxes are passed onto workers, so reducing the rate to below this average will increase business competitiveness, lead to more jobs, and help put a stop to business inversions.
Lowers Capital Gains Taxes
H.R. 3017, the “Invest in America Act,” reduces the top rate on capital gains and dividends from 23.8 percent to 15 percent – the same rate before President Obama took office. A capital gain is income derived from an after tax investment and so ideally should not be taxed at all – the taxpayer has already paid income taxes on these earnings. This legislation moves a step in the right direction by reducing capital gains taxes paid.
Bring Back Income Trapped Overseas Through Repatriation
The U.S. tax code is one of the few worldwide systems, which means the IRS taxes income of American businesses even after it has been taxed in the country it was earned. H.R. 3083, helps fix this double taxation by implementing an optional repatriation rate of 5 percent to encourage businesses to bring back this income, which will lead to substantially increased investment in the U.S. economy.
100 Percent Bonus Depreciation for Business Expenses
H.R. 3213, the “Fixed Asset Relief Act,” creates 100 percent depreciation for fixed business assets including computer software and leasehold improvement property. This bill helps remove the bias in the tax code toward investment. Presently, business expenses are subject to a bizarre patchwork of rules governing depreciation that varies widely depending on the purchase. It makes no sense for the tax code to say that a wage payment, or a rent payment, or a box of pencils should be deductible on the one hand, and that a computer or desk is not.
Reduces FICA & Self-employment Taxes
H.R. 3267, the “Paycheck Relief Act,” reduces FICA payroll taxes and the self-employment tax by 2 percent. For many workers this means substantially more take home pay as they are now paying payroll taxes of just 5.65 percent of wages, not 7.65 percent of wages.
Protect Current Accounting Practices
Last-in, first-out accounting (LIFO) is one of three methods used by businesses to calculate inventory costs. LIFO generally assumes that the last inventory purchased is the first to be sold and gives businesses important flexibility when accounting for their inventory. In the past, this practice has been targeted as a “pay-for” in several tax reform proposals. H.CON.RES.69, express the sense that this important provision should not be repealed. In an ideal world, there would be full 100 percent first year deduction of costs, including inventory. In the absence of this it is imperative that LIFO available for businesses.