Tax reform is an elusive legislative goal. Add a partisan divide that exists in our country today, and it seems almost impossible to achieve. Remarkably, an opportunity to pass meaningful tax reform is now available; however, Congress must act and act soon before the door closes.
From day one, the president has called for tax reform and he and Congressional leaders deserve credit for recently unveiling a comprehensive tax reform package.
The Dow and other stock indexes have had a tremendous bounce after last November’s election. But that positive bounce is predicated on tax and regulatory reform being passed by Congress. Wall Street and Main Street are counting on passage of tax reform this year—the first serious reform since 1986. This would give our nation and economy momentum and extend the current recovery. The pressure is now on Congress to vote and pass legislation, something it has not had a good record of doing lately.
Meaningful tax reform, as noted by a recent survey of business leaders in the United States, will be positive for the nation’s economy. Capital investment, hiring and sales are all expected to increase according to Business Roundtable’s survey of chief executives published earlier this year.
A couple of highlights from the tax package are:
▪ Reduction from seven brackets to three—12 percent, 25 percent and 35 percent;
▪ Doubling standard deductions for most households.
For corporate taxes:
▪ Cuts the corporate tax rate to 20 percent from 35 percent.
From presidents Kennedy to Reagan, tax reform/cuts have had a positive impact on the U.S. economy and tax receipts collected by the government. Our country has now been left with a $20 trillion national debt. The only way to reduce this debt is by economic growth and reduced spending.
First quarter gross domestic product (GDP) this year was a poultry 0.7 which was later revised to 1.2. All while the stock indexes are at an all-time high, there are risks to our economy and tax reform/cuts are much needed.
Second quarter GDP growth was at 3.1, a high we have not seen in years, which was in part based upon anticipated tax and regulatory reform. Additionally, an Oct. 6 job report that shows a loss of jobs illustrates our economy is in a precarious position.
The Wall Street Journal reported a few months ago that small business start-ups are down 25 percent in the past six years. A tax reform package, if approved by Congress, would be the best stimulus to strengthen our economy and get more monies back out to job creators and business builders. It would also bring back the American entrepreneurial business start-up spirit. Passage of this tax reform package will really help small businesses, the heart and soul of America’s economy and the jobs engine of our country. It is time small businesses received a tax cut.
President Trump’s plan to lower the corporate tax rate will make our country much more competitive; it will be a win for our economy, keep more jobs in America and balance our position with other G-20 nations. In most rankings, the U.S. has the highest corporate tax rate.
A tax plan that levels the tax playing field for businesses — not only with global competitors, but also those right here at home — will help to strengthen American companies. The government should not be picking winners and losers; it should treat all industries the same.
For example, the tax loopholes of the large credit unions and the farm credit system should be finally closed. A family of four should not be paying more in taxes than a billion dollar credit union. In order to pay for a tax cut, Congress will have to stand tall in the saddle and take steps to end corporate welfare for some industries. Credit unions, some of which are multi-billion dollar financial institutions, are not paying for the needs of our country. The small mom-and-pop credit unions should continue to enjoy their tax exempt status.
Members of Congress must do their jobs and pass tax reform now.
Alex M. Sanchez is president and CEO of the Florida Bankers Association which is composed of small, regional and large financial institutions that together employ tens of thousands of Floridians, safeguard more than $500 billion in deposits and extend more than $135 billion in loans.