Grover Norquist has shown just how desperately America needs tax reform in his latest op-ed for Fox News. After eight years of Obama and one of the worst recoveries in recent memory, the American people need a new strategy to return to healthy economic growth. To do this, we need to get government out of the way.
As it stands today, the United States has the highest corporate tax rate in the world, putting us at an economic disadvantage against foreign competitors. Grover explains:
Over the past decade, the economy has struggled at just two percent GDP growth – the worst recovery of the modern era. This lackluster recovery has cost families an average of $8,600 in annual income, according to the Joint Economic Committee. The Congressional Budget Office projects that two percent growth will continue into the next decade under current policies.
Today, American businesses are taxed at rates far exceeding the rates faced by foreign competitors. The average federal/state corporate tax rate in the U.S. is roughly 39 percent, while the average rate paid by foreign competitors is about 25 percent. Businesses organized as pass-through entities face even higher rates – above 40 percent, and even 50 percent when state tax rates are accounted for.
While the U.S. rate remains high, other countries have adapted to the global changes by aggressively reducing their rates. Today, only the U.S. and Chile have higher corporate tax rates than they did at the start of the century.
These high tax rates must ultimately be paid by the American people, meaning lower wages, less employment, and higher prices. And this, according to Norquist, is without even beginning to touch upon the sheer complexity of the tax code itself, which is filled with redundancies and arbitrary moves:
Under the current code, business owners cannot immediately expense the cost of purchasing equipment against their taxable income. Instead, they are required to deduct, or “depreciate,” these costs over several years depending on the asset they purchase, as dictated by complex and arbitrary IRS tables. These rules create needless complexity and increase compliance costs.
Moving forward, what America needs to see real economic recovery is for the market to be allowed to work and to remove the burdens and manipulations of government planning, and that begins with tax reform to stop punishing producers.
Photo Credit: Gage Skidmore