Since President Trump’s inauguration, the American economy has seen a refreshing pattern of growth. Unemployment is down nearly one percent—the lowest point in the past 11 years—and the economy is on a path to three percent growth.
This is welcoming news considering that, in 2016, 52 percent of voters chose the economy as the number one issue facing the nation.
But the work is not over. It’s time for Republicans in Congress to follow through on their campaign promises and boost the U.S. economy through legislative reforms. The path to sustained prosperity is clear: Pro-growth tax cuts for small businesses.
The current tax code is a barrier to job creation, and the tax rates add up significantly. Most small businesses are taxed as pass-through entities, which means they are taxed at their owner’s’ highest marginal individual rates—up to almost 40 percent on the federal level. When you add in state and local taxes, small business owners can pay up to 60 percent in taxes!
These burdensome rates hurt the economy, which depends on small businesses to invest in expansion and hire new employees. High tax rates result in job loss, hurting employees and their families. Information related jobs, for example, have decreased by over 10 percent in the last 10 years.
As the former owner of Common View, a technology company in Columbus, I have personally seen this devastation, and I know the outdated tax system is partly to blame. U.S. businesses spend an estimated $147 billion a year filing tax returns. That money could otherwise be used to lower consumer prices, or better yet, reward the company’s hard-working employees with higher wages.
Tax filing also takes a lot of time, and small business owners often have to turn to outside tax professionals just to get their tax returns done. This is another avoidable cost, and it diverts job creators’ attention from what they’re best at: Creating new jobs for working Americans.
Small businesses need a tax system that is simple, balanced, and fair.
The claim that tax cuts fuel economic growth is supported by historical context. When President Reagan signed the 1986 Tax Reform Act, rapid growth and job creation followed well into the Clinton presidency. The Bush-era tax cuts produced the largest four-year tax revenue in American history, debunking the myth that lower taxes lead to less money for vital government programs.
The current tax proposals coming out of the White House envision a simpler system with fewer loopholes. President Trump’s proposed reduction in small business tax rates—along with the elimination of needless loopholes—would allow small businesses to be more competitive with no adverse effect on government revenue. When businesses are encouraged to hire more workers and grow their wages, tax cuts become deficit-neutral.
Congress, stop playing politics and pass the tax cuts working Americans desperately need.
Jim Burgess is a member of the Ohio Republican Party State Central Committee.