Twenty-five years ago this week, President Ronald Reagan defied the political odds and signed into law sweeping legislation that simplified and reformed the U.S. Tax Code. Recognizing that he needed bipartisan support, Reagan worked with both a Democratic-led House and a Republican-led Senate to make tax reform a reality. The bipartisan bill resulted in the creation of 6.3 million new jobs in the two years after its enactment.
It’s time for this administration and Congress to take a page out of the Reagan playbook. Reforming our outdated and convoluted tax reform is exactly what our country needs today to help spur job creation and reduce our staggering deficits.
All eyes are on the 12 congressional members of the deficit “super committee” to provide recommendations on how Congress can cut spending and pay off our national debt. At a time of heightened partisanship this committee has a difficult, but not impossible, task.
I believe comprehensive tax reform is an area where Republicans and Democrats can find common ground and agree on a set of fundamental principles. Those principles should include:
Simplification: Since Reagan’s 1986 tax reform, Congress has amended the tax code more than 14,000 times. Today, the U.S. tax system is a tangled web of exemptions, deductions, credits and other special-interest preferences. Through reform, we can make it possible for most taxpayers to file a simple one-page IRS 1040 form.
Fairness: Americans deserve a tax system that is fair, not one that picks winners and losers or promotes class warfare. We need to put an end to the specialized tax breaks and tax earmarks that favor only a few.
Revenue neutrality: Additional revenues gained from closing tax loopholes must be used to lower rates on individuals and businesses. It should not be used to raise more revenue for Washington bureaucrats to spend.
Protection for families: Any comprehensive tax plan should eliminate the alternative minimum tax and maintain important provisions like the mortgage-interest deduction, child tax credit and charitable tax deduction.
Economic growth: U.S. corporations pay the second-highest tax rate among industrialized countries. By reducing the rate, we can make businesses more competitive in the global marketplace so American companies will be able to grow and hire here at home.
Sen. Ron Wyden, D-Ore., and I have teamed up on a bipartisan comprehensive tax reform proposal that is based on these principles. Our bill cuts the corporate tax rate to 24 percent and simplifies individual tax rates so most families would pay less. The Heritage Foundation found our approach would create 2.3 million jobs a year while cutting the deficit by an average of $61 billion a year.
Americans are frustrated with political partisanship and rightly skeptical that any good can come from a “super committee.” While I share that frustration, I am encouraged by a growing bipartisan coalition of more than 43 senators who are urging the committee to go bold and exceed its mandate by finding additional trillions of dollars in savings.
This can be done by starting with comprehensive tax reform, one of the most effective bipartisan tools the committee has available to reduce the deficit and grow our economy.
As I visit with Hoosiers, I hear the concern in the voices of the parent trying to make the mortgage payment, the manufacturer trying to find work, and the business owner trying to make payroll. Americans want action that will revive our ailing economy and produce good-paying job opportunities. Tax reform represents the best opportunity for both parties to work together and deliver meaningful results.
By Senator Dan Coats
U.S. Sen. Dan Coats, a Republican, represents Indiana.