Congress returned to Washington last month with quite a daunting to-do list. They were able to quickly check off a few items — helping storm victims, funding the government, and extending the debt ceiling on a short-term basis. Still on this list are healthcare and immigration reform — both issues that will not be easily resolved.
However, there is one important economic priority where we are seeing significant momentum and a general consensus from the White House and Capitol Hill, and that is tax reform.
The last time Congress passed comprehensive tax reform was over 30 years ago and few would argue that the time has come to update our nation’s tax code. The New England Council believes that we must modernize our tax code in such a way that it will drive economic growth, increase American competitiveness in the increasingly global economy, and promote American innovation.
While our members — which include businesses and organizations of all sizes across a broad range of industries — have various individual priorities, the Council offers several recommendations for our Congressional leaders as they tackle tax reform in the coming weeks and months.
First, tax reform must be comprehensive. As House Ways & Means Committee Chairman Kevin Brady (R-TX) has often noted, “tax reform is truly one of those once-in-a generation opportunities.” As such, a tax reform package deserves to be bold, and that means it should include both corporate and individual changes in the same deal.
While the business community is, of course, concerned with how tax changes will impact their own industries and firms, they are also concerned with the well-being of their employees as well as the customers they serve. Making tax reform truly comprehensive will help ensure that all Americans benefit.
Second, any tax reform legislation that moves forward should focus on simplification of the tax code. We hear time and again from our members that the tax code is far too complex; that it is difficult to monitor, hard to interpret, and at times harder to comply.
According to some estimates, more than 4,400 changes have been made to the U.S. tax code over the past decade alone. By making it easier to file taxes and read the code properly, businesses will have the ability to spend less time and effort completing onerous paperwork and more time making and selling goods and serving their customers.
Third, reforms to our tax code must be permanent to provide certainty for businesses. Knowing what to expect for years to come is critical in making long-term plans related to workforce, equipment and projected growth. In recent years, we have seen a number of temporary tax credits and short-term extensions, which have caused significant unease for businesses. The certitude that comes with knowing what the country’s tax code will look like long term is a critical element to help grow the economy, and it should be incorporated into any tax reform package.
And last but most certainly not least, our tax code must be updated to make American companies more globally competitive. We live in a global economy and many businesses based here in New England and across the country operate globally. The United States’ worldwide system of taxation and a high corporate rate together create an uncompetitive tax regime that hinders companies’ abilities to compete with foreign competitors and incentivizes inversions.
An important goal of tax reform should be to level the playing field for American businesses by lowering the corporate tax rate and changing the way we tax overseas profits to promote domestic reinvestment of such proceeds. In addition, companies with similar operations should be taxed equitably, whether located within the United States or operating globally.
As this debate moves forward, the New England region is fortunate that our interests will be well represented by the dean of the New England Congressional delegation, Rep. Richard Neal (D-MA), who earlier this year became the ranking member on the Ways & Means Committee.
As Congressman Neal and his colleagues on Capitol Hill continue this important work in the weeks and months ahead, we hope they will take these recommendations into account. Tax reform presents an extraordinary opportunity for our leaders to make much-needed and long-overdue changes that will drive economic growth, create jobs, and support continued innovation here in New England and beyond.
James T. Brett is the president & CEO of The New England Council, an alliance of business, academic and health institutions, and public and private organizations throughout New England.