It has been more than seven years since the financial crisis rocked our nation’s economy, but the fiscal challenges still facing our nation are innumerable. Economic growth is underwhelming, families’ homes remain in foreclosure, paychecks cannot keep up with rising costs, students continue to struggle with skyrocketing tuition, and millions of hardworking taxpayers are seeing their medical costs increase as a result of President Obama’s health care law. Regrettably, the President and his party have turned to more taxes, more spending, and more regulation in an attempt to address these issues.
Conversely, for four straight years in my capacity as Budget Committee Chairman, I introduced and passed budgets that would have set comprehensive tax reform in motion. The Fiscal Year 2015 budget, “The Path to Prosperity,” would have simplified the tax code to make it fairer for American families and businesses. Our plan would have reduced the corporate tax rate to 25 percent and transitioned the tax code to a more competitive system of taxation, creating a level playing field between American businesses and their foreign competitors, which would help keep jobs in the U.S. The tax code for individuals would also have been simplified, consolidating the current seven individual-income-tax brackets into two brackets—setting the first bracket at 10 percent and the top bracket at 25 percent. Economists have shown that lowering overall rates and broadening the tax base will promote economic growth and support job creation the private sector.
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, highly inefficient, and is littered with special interest loopholes that need to be eliminated. The tax code's complexity distorts 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. This budget proposed to solve these problems by calling for a reformed tax code.
Currently, the U.S. corporate tax rate is 39.1 percent—the highest marginal rate in the industrialized free world. Additionally, the top federal rate on smaller, unincorporated businesses reaches 44.6 percent. Roughly half of private-sector employment is derived from these businesses—such as partnerships, S corporations, and sole proprietorships. These high tax rates discourage investment and job creation, distort 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. Today, two-thirds of net new jobs in America are created by small business. At the same time our foreign competitors are lowering taxes, which means if we wish to remain competitive, we need to lower tax rates – not raise them as the President has proposed. 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.
I think that reforming the tax code is one of the most important domestic policies goals we can accomplish. To do so, I will advocate for a tax system that is simpler, flatter, and fairer for all Americans. We need reforms that enable small businesses to expand, families to save for their future, and individuals to keep as much of their hard-earned pay as possible. I remain committed to tax reform and I look forward to working with my colleagues on both sides of the aisle to enact meaningful changes to our current system.