As our legislature in Carson City continues to consider bills that will increase costs on business, Congress is considering tax reform that could spur job growth.
What are the consequences of a U.S. tax code that hasn’t been reformed in more than thirty years? For starters, the tax rates paid by American businesses are as much as double what competitors in other nations pay. Small businesses like the Jimmy John’s sandwich shop I own are often hit even harder, paying as much as 44 percent because of our out-of-date tax code. This is a heavy burden that hold our economy down, and it’s time to make a change.
The best blueprint for change is the one that has been proposed by Speaker Paul Ryan and House Ways and Means Chairman Kevin Brady, called “A Better Way.” This bold plan would reform the tax code lowering the federal corporate tax rate to just 20 percent and reducing the tax rate for small businesses to 25 percent. If it becomes law, the Ryan-Brady blueprint would levy the lowest tax rate on small businesses like mine since World War II. As a retired economist, I know that this kind of neutral, comprehensive tax reform would unleash job growth. In my own personal business, I can also say with paying a more reasonable tax rate would allow me to invest in my workers and my franchise.
Just how powerful is the potential of the Ryan-Brady plan? By creating a nearly $2.4 trillion tax cut for American taxpayers, the Tax Foundation estimates that the plan would generate 1.7 million new jobs and generate higher growth in American GDP growth of 9 percent. American families would see an average increase of between $3,000 and $4,600 each year in their after-tax income. These are massive boons for the American economy that make a real difference.
The plan also helps level the playing field for Nevada’s exporting companies by ensuring that imports and exports receive the same tax treatment. As President Trump pointed out in his address to the Joint Session of Congress, American products are often heavily taxed before they are sold in foreign countries while goods coming into our borders are largely left untouched. This is a woefully uneven playing field that puts U.S.-based businesses at a disadvantage. The Ryan-Brady blueprint resolves this issue through the use of border adjustments. These adjustments not only create a fairer basis with tax treatment for American and foreign companies, but they also will generate over one trillion dollars in tax revenue that helps make the overall tax cut plan possible.
Because the Ryan-Brady blueprint is a neutral and comprehensive plan for reforming our tax code, the blueprint deserves the strong consideration and attention of Congress. If our lawmakers truly want to kickstart the American economy and create new jobs, they must lower the tax rate on businesses large and small. They also must ensure that the tax code of tomorrow doesn’t treat one industry differently than another. And if they truly want to allow American businesses to compete fairly with their competitors, they must consider the use of border adjustments. This approach can produce immediate results for businesses like mine and the millions of workers they employ. Nevada’s lawmakers from both parties should advance this promising tax reform blueprint to accelerate more robust growth for Nevada’s economy.
Tim Wulf lives at Zephyr Cove, is a retired economics professor, and owns a small business in Reno.