Changing the tax code
When it comes to changing our tax code, Washington should trust the free-enterprise system. The problem is too many politicians writing tax policy have never worked in the real world.
Washington now should also avoid the mistakes of career politicians of the past. Too often they have piled bad ideas on top of good ideas and created “sweeping reform” packages that hurt the very people lawmakers intended to help.
Four major ideas to rewrite our tax code are currently being discussed by the House of Representatives. Three are pro-growth and level the playing field with the rest of the world. One, simplifying the individual tax code. Two, lowering the corporate income tax rate. Three, dealing with the repatriation tax.
However, the fourth idea being crammed into this comprehensive proposal by the House is the so-called “border adjustment tax.” This 20 percent tax on all imports is regressive, hammers consumers, shuts down economic growth, and is proven to grow the federal government.
Increased consumer prices would hammer consumer confidence and lower overall demand, thus putting downward pressure on jobs. This is exactly the wrong approach to take right now. A University of Maryland study estimates that some industries could face employment declines of up to 20 percent.
Why would we do this at a time when millions of Americans are struggling to get from payday to payday?
As I saw firsthand in Europe, this new tax also grows the size of the federal government. When EU countries installed a similar tax scheme — the value-added tax (VAT) — central governments grew by more than 60 percent.
Also, the argument that currency revaluation will offset this tax does not hold up in the real world.
Any and all changes to the tax code should be focused on leveling the playing field and generating economic growth. We can do this by taking a few simple steps that most Americans already support. We can:
1) Simplify the individual tax code so it makes sense at all economic levels,
2) Dramatically lower the corporate tax rate so the United States is competitive with the rest of the world, and
3) Abolish the repatriation tax that has trapped over $2 trillion dollars from being invested in the U.S. economy.
The only reason this new tax on imported goods is being considered is to offset perceived losses in federal revenues from these other tax changes.
This is a classic mistake made by career politicians who are not listening to folks back home. Historically, lawmakers have crammed numerous proposals into a single, massive, overreaching bill.
Each of these ideas should be considered independently and evaluated on their own merits.
For example, Grover Norquist only backs this border adjustment tax because it’s combined with the other positive changes to the tax code. If it were to be considered on its own merits, “it’d be a no,” he recently said.
For sure, the tax code needs substantive change, but when Congress combines good ideas with bad ideas into a single sweeping bill, the bad ideas become law. This proposed border adjustment tax is a bad idea and should not become a permanent part of our tax code.
America has the greatest economy in the world, but it has been held back by our archaic tax code and pervasive regulatory regime.
Isn’t it time to trust the free enterprise system so it can begin to work again? Isn’t it time to stop strangling our economy with complicated tax concepts that will not work? Isn’t it time to unleash a new era of economic growth and prosperity in America?
Job one for President Trump is to get the economy moving again and create jobs. It is refreshing to finally see both Congress and the White House working together to jump-start economic growth. Let’s not jeopardize this opportunity by putting in place a new tax that would threaten reaching our shared goal.
• David Perdue, a Republican senator from Georgia, is the only Fortune 500 CEO in Congress.