A gallon of gas was $0.89, the Dow Jones Industrial Average closed at 1,895, the Nintendo Entertainment System was introduced, the world received its first email, and I was in high school. The year was 1986, and it was also the last time comprehensive tax reform was passed. Thirty-one years later, the U.S. tax code has ballooned to over 70,000 pages, filled with loopholes exploited by special interests and tax rates that put American companies at a global disadvantage.
It is clear the time for reform is now, which is why Congress has begun work on a comprehensive reform of the tax system to help build a strong 21st-century economy.
In the House of Representatives, the proposal put forth specifically focuses on lowering the tax rate for our Main Street job creators to the lowest rate since World War II. While the current system taxes all earnings at the normal income tax rate—which can be as high as 39.6 percent—the House plan allows for a distinction between business and wage income for certain small businesses. To break this down, for a locally-owned business in Peoria, 30 percent of income would be eligible for taxation at the Main Street business rate (25 percent in our proposal), while the remaining would be considered personal income and taxed at the appropriate rate. This would amount to thousands of dollars in savings for the business, while also ensuring the pass-through rate is not abused by wealthy individuals. My hope is that the Senate proposal will include similar savings.
Our corporate tax rate is also a major focus, as it is currently the highest in the industrialized world at 35 percent. While American workers continue to be the most efficient and effective anywhere, the much lower tax rates abroad too frequently encourage businesses to relocate or stash profits overseas, with an estimated $2.6 trillion in profits currently being kept abroad. By lowering the corporate rate and facilitating the repatriation of funds from overseas, we will level the playing field for American businesses so they can compete on a global scale. For larger businesses in the district, such as Caterpillar, ADM and John Deere, this change will encourage investment and expansion here at home.
An analysis of the House proposal concluded that this kind of reinvestment would lead to not only 40,545 additional full-time jobs in Illinois, but also a median increase of $2,701 in take-home pay for each Illinois household. In one recent study, 76 percent of business leaders agreed that the savings from tax reform would be used to increase hiring here at home. After years of anemic economic and job growth, this tax relief plan will grow the American economy and better the lives of everyday families who have been left behind for far too long.
I believe the current tax code is a burden not only to our country’s businesses, but also to the middle class. We can’t continue to advocate for the status quo over common-sense tax reforms. We are determined to bring American businesses the relief and fairness they need to create jobs and keep our country at the forefront of the world economy. After more than three decades, it is long overdue. iBi