January 24, 2011

Tiberi and Wyden: “Democrats and Republicans can work together on Tax Reform”

Washington, D.C. - Calling on President Barack Obama to rally Congress to tackle tax reform this year, Democratic Senator Ron Wyden and the Republican Chairman of the House Ways and Means Subcommittee on Select Revenue Measures, Pat Tiberi, offered a list of reasons why they believe that Democrats and Republicans in Congress can and should work together on a major overhaul of the federal tax code similar to what President Reagan achieved with a divided House and Senate in 1986.
“We understand the temptation to believe that Congress can’t pass anything significant this year, but now is not the time to think small and shy away from tackling the nation’s biggest problems,” said Wyden and Tiberi.  “Democrats and Republicans may not be able to agree on everything, but they can agree that the tax code needs fixing.  Much like President Reagan and a Republican Senate teamed up with a Democratic House to reform the tax code in 1986, President Obama and Senate Democrats can team up with a Republican House to do it now.  And if we choose to be bold, we can create jobs, spur investment in the United States and give working families the relief they so desperately need.
“Our country needs us to step up to the plate and we are prepared to roll up our sleeves and work together on serious tax reform this year.
Here’s why our colleagues should join us:
The Tax Code is too complex for families and businesses.  Americans spend 6.1 billion hours a year complying with tax law. It costs us $163 billion to comply with our tax laws annually. That is the equivalent of 3 million people working full-time just to comply with the Tax Code.  The time and money spent on tax compliance drains away resources that could be better used to grow our economy.

The Tax Code is stifling economic growth and job creation.  In addition to the deadweight costs, the current broken Tax Code distorts economic decisions, resulting in less economic growth and job creation.  After the last comprehensive reform of the tax code in 1986, 6.3 million jobs were created over the next two years.
Tax Reform is needed for US businesses to compete in the global economy. Currently, the US corporate income tax rate is the second highest (and soon to be highest) in the industrialized world, putting American employers at a competitive disadvantage in the international marketplace.  Reforming the Tax Code to lower the corporate rate will put American employers on a more level playing field with their foreign competitors.  In addition to the corporate rate, we also should re-examine our antiquated international tax rules – created 50 years ago when the global economy looked very different.

Comprehensive Tax Reform is needed to lower the burdens on families and small businesses.  The vast majority of small businesses are not corporations.  They are sole proprietorships, partnerships, S Corporations and other entities that pass through their income to their owners who pay taxes as individuals.  Tax reform should lower the compliance burdens on these businesses, so they can spend less time and expense on tax compliance and more on growing their businesses and creating jobs.

The 1986 Tax Reform Act provides a model for bipartisan tax reform.  Back in the 1980s, there was a Republican President and a Republican Senate, and Democrats in the majority in the House.  They were able to work together in the 1980s to achieve bipartisan tax reform and create millions of good-paying jobs.  Today, with almost a mirror image of what we had in the 1980s, there is another opportunity for Democrats and Republicans to work together for bipartisan tax reform following the model of the 1986 law.