Along with fairer corporate tax policy, reform must include relief for the middle class
As I drive through Youngstown, Ohio, I’m met by empty storefronts and vacant factories. Americans living in areas like mine are struggling: The cost of living keeps going up, families are underemployed and many have not seen a raise in more than a decade. All the while, their corporate employers have seen record profits. Something is wrong with this equation.
Among the many factors contributing to this situation is America’s broken corporate tax code. It prioritizes large corporations with the resources to avoid paying taxes over smaller and medium-sized businesses who pay the full rate. In the 31 years since Congress last reformed our tax system, 96 percent of income growth has gone to the top 10 percent of Americans. Hourly wages for the bottom 90 percent of workers have stagnated or declined. Families have struggled to afford their medical bills, put food on the table and pay their mortgage. The only thing Democrats and Republicans seem to agree on these days is that it is time for a change.
At a time when half of all Americans are living paycheck-to-paycheck, profits at America’s largest corporations have skyrocketed. But instead of investing in our economy and the American family, these large corporations pay armies of accountants to exploit every loophole in the book. When that is not enough, they send lobbyists to Washington to create even more exemptions and special interest tax breaks.
Through these loopholes, large corporations have stashed trillions of dollars outside the United States to avoid taxes. General Electric reportedly has $83.5 billion overseas. Pfizer reportedly has $80 billion. One in 5 corporations even manage to pay no federal income tax. Add in the loopholes and special interest giveaways, and the 35 percent statutory rate becomes only an 18.6 effective tax rate.
So how do we achieve revenue-positive tax reform that holds corporations accountable and ensures the middle class is not picking up the slack? My conversations with tax experts all point to the same solutions.
First, eliminate the vast majority of special interest tax breaks. Corporations have riddled our tax code with loopholes that leave us vulnerable to tax cheats and drain revenue from the federal treasury. Americans go to work, collect their paychecks and pay the taxes they owe. As a matter of fairness, corporations have an obligation to do the same. Second, move tax liability from corporations to the people who own them. Individual owners and shareholders benefit from corporate profits and should be taxed accordingly. This means lowering the corporate tax rate while making up the difference through higher taxes on capital gains and dividends. Aside from it being easier to tax a person than a corporation, which only exists on paper, this reform would shift the tax burden away from a corporations’ hardworking employees, whom the Congressional Budget Office estimates pay at least 25 percent of the corporate tax.
Unfortunately, President Trump and congressional Republican have not shown a good-faith interest in making the needed changes to our tax system that would give working-class Americans the hand up they deserve. We have seen this show before. Republican tax plans always fall back on the same discredited supply-side, trickle-down economics that enrich large corporations and corporate owners at the expense of the middle class and smaller, less tax-savvy businesses. That is not meaningful tax reform, and that is not a tax policy that Democrats will support.
Meaningful reform would include a $1 trillion expansion of the earned income tax credit that will put $12,000 in the pockets of working families earning less than $75,000 every year. Meaningful reform would drastically simplify the tax code and allow millions of Americans to file a pre-populated return online for free without having to pay for TurboTax or QuickBooks. Meaningful reform would expand the child tax credit to help parents balance the demands of work and family. Meaningful reform would setup new, private investment structures that would make it easier for businesses in distressed communities to receive investment capital.
Americans and communities across the country are hurting. They need relief, not rhetoric. They need a tax code that promotes fairness, grows the economy, creates jobs by keeping our businesses competitive globally, and eases the burden on middle-class taxpayers. They need to know that when Congress takes up the debate on tax reform, we will advocate for policies that put working families first. Meaningful reform should work for everyone, not just those at the top.
Ryan represents Ohio’s 13th District.
You can read the Op-Ed as it was originally published in The Hill here: