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At a time when Wisconsinites are facing economic uncertainty and an increase in the cost of living, the last thing our country needs are tax increases.  Our country faces many challenges.  It is over six years since the financial crisis and many families have still not recovered.  Economic growth is too slow, too many families are stuck in foreclosure or are falling behind, students continue to struggle with meeting their tuition payments, and millions are seeing their medical care costs skyrocket as a result of President Obama's health care law.  Unfortunately, President Obama and his party have turned to more taxes, more spending, and more regulation.  And, as we have seen, maintaining the status quo has not improved the economy.  Washington owes the American people a better path forward. 

Fixing the Broken Tax Code

Our tax system should be simple, fair, and promote economic growth; but the U.S. tax code fails on all three counts.  It is notoriously complex, patently unfair, and highly inefficient.  The tax code's complexity discourages decisions to work, save, and invest, which leads to slower economic growth, lower wages, and diminished job creation.  It is estimated that individuals, families, and employers spend over 6 billion hours and over $160 billion a year trying to understand a labyrinth of rules. Over the past decade, more than 4,400 changes have been made to the tax code, which averages to more than one per day.  The House passed budget proposes to solve these problems by calling for a reformed tax code.

Currently, the U.S. corporate tax rate is 35 percent.  Additionally, the top federal rate on smaller, unincorporated businesses reaches 44.6 percent.  Roughly half of all U.S. business income and half of private-sector employment are derived from these businesses—such as partnerships, S corporations, and sole proprietorships.  These high tax rates discourage investment and job creation, discourage business activity, and put American businesses at a competitive disadvantage.  It is also important to note that in Wisconsin approximately 9 out of 10 businesses file their taxes as individuals.  These small businesses, known as "sub-chapter S corporations," limited liability corporations (LLCs), and partnerships employ more than half of all private sector workers.  With two-thirds of the net new jobs in America being created by small businesses, raising taxes on these businesses would kill job creation—especially at a time when some of our foreign competitors are lowering their tax rates on business as low as 15 percent. 

By making the tax code more conducive to innovation and investment, we can stimulate job growth and get the economy back on the road to recovery.   As Speaker of the House, I will continue to work empower the tax writing committees and members across the aisle to accomplish this worthwhile goal. 

Protecting Americans from Tax Hikes (PATH) Act

As you may know, for decades, Congress has undertaken a disorganized, haphazard process of extending a patchwork of provisions in the Internal Revenue Code for various lengths of time.  This process is incoherent and unpredictable for Members of Congress, but more concerning is the uncertainty it creates for small business owners and families.  It is the product of our excessively complex and inefficient tax code and one of the chief reasons why the tax code continues to hinder economic growth and create headaches for working families. 

The PATH Act represents a pro-growth tax relief package that provides much needed certainty for hardworking people and more opportunity for America's small businesses.  It will help to create job growth and allow taxpayers to keep more of the money they earn.  Specifically, the PATH Act delivers tax certainty for individuals and families by making the state sales tax deduction permanent.  This bill also provides relief for small business by making permanent the Section 179 expensing of capital investment and machinery.  This will allow businesses to plan, hire, and make the long-term investments they need in order to expand their operations and increase productivity.  To encourage innovation and growth, The PATH Act provides a five year extension of the research and development tax credit.  

This bill permanently extends the ability of persons 70.5 years and older to exclude charitable distributions from Individual Retirement Accounts from gross income for federal tax purposes.  The PATH Act permanently changes the Earned Income Tax Credit to increase the credit for working parents of three or more children and reduce the marriage penalty by increasing the income range over which the credit is phased out for married couples filing jointly.

In addition to providing pro-growth and pro-family tax relief and greater tax certainty, this bill contains important reforms aimed at protecting the integrity of tax credit programs and preventing improper payments, fraud and abuse.  The PATH Act also includes provisions which will protect taxpayers' privacy and rights.  It will hold Internal Revenue Service employees accountable for improper and illegal targeting or failure to comply with the taxpayer bill of rights. 

Perhaps most importantly, this bill lays the groundwork for historic reforms that will fix our broken tax code.  This bill is not perfect, and our broken federal tax code remains a burden on economy.  The kind of tax reform our economy so badly needs will require much more work, but this bill represents an important first step.  Moving forward, instead of spending months each year debating temporary tax extensions, Congress will be able to focus on the comprehensive tax reform that we all agree our country needs.

Americans deserve a simpler, fairer and flatter tax code that's built for growth, and this bill will help create an environment to make that possible.  On December 17, 2015, the House passed the PATH Act by a vote of 318 to 109.  On December 18, 2015, also in bipartisan fashion, the Senate passed a larger piece of legislation which included the PATH Act by a vote of 65 to 33.  On December 18, 2015, President Obama signed that legislation into law. 

Ways and Means Committee Legislation

As the 114th Congress continues, the Ways and Means Committee, which is charged with writing all tax legislation, has advanced numerous pieces of legislation designed to help make the tax code more simple and fair.  I want to highlight two pieces in particular. 

As you may know, Section 529 plans are a popular method of saving for college – used by families across the country.  In its initial iteration, the President’s FY 2016 Budget proposed to tax certain future distributions made from 529 savings plans; however, given an immediate bipartisan concern with this idea, the proposal was stripped from the President’s final budget.  While I was pleased to see the President did not include this proposal in his final budget proposal, I was encouraged to see the House act on legislation designed to expand, strengthen and modernize 529 college savings accounts.  In late February 2015, the House considered H.R. 529, which was agreed to by a vote of 401-20.  I look forward to the Senate acting on this common sense piece of legislation.  

Further, the House considered, HR 1105, the Death Tax Repeal Act of 2015.  As you may know, I have long supported the full and permanent repeal of the estate tax because I do not believe that death should be a taxable event, and because it acts as a direct, job-killing tax on family-owned farms and small businesses, which have historically created countless good jobs in Wisconsin and across the country over the last decade.  For these reasons, I was pleased to support this legislation, which passed in a bipartisan fashion by a vote of 240-179.  The bill was received in the Senate on April 20, 2015, and I look forward to Senate action on this important piece of legislation.   

Ultimately, Washington must put the taxpayer first – not the government.  I will continue to work to advance common sense pieces of legislation which do just that.    

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