Republicans passed a historic tax overhaul called the Tax Cuts and Jobs Act in 2017. The reason? Our tax code hadn’t been updated since the 1980s, even though the way we lived and did business was totally different. As a result, we unleashed economic growth that put more money in people's pockets, provided greater opportunities, and brought poverty to record lows.
Yet, President Joe Biden wants to undo all that progress.
We need a forward-thinking tax code that incentivizes growth, encourages domestic investment, and doesn’t penalize companies for being successful.
The business world is increasingly global, with companies operating in hundreds of countries at once. Before the Tax Cuts and Jobs Act, we had the highest corporate tax rate in the developed world. We operated on a worldwide tax system in which it made more sense for companies to keep their global earnings offshore indefinitely, rather than pay our steep 35% corporate tax rate. U.S. companies were at a severe disadvantage in the global marketplace, resulting in profit-shifting, offshoring, and increased corporate inversions and foreign acquisitions of U.S. companies.
That 35% corporate rate made the cost of domestic production the highest in the world’s advanced economies. These operational barriers robbed us of domestic investments and, more importantly, job opportunities.
The Tax Cuts and Jobs Act brought us into the 21st century, giving America a competitive edge. Pro-growth policies enacted by the Trump administration fostered economic development within the United States instead of incentivizing companies to leave. We lowered the corporate tax rate to 21%; provided for immediate expensing of property, plant, and equipment; and adopted a new minimum tax on foreign earnings. The Tax Cuts and Jobs Act made the U.S. an attractive place to invest and create good-paying jobs, and it significantly reduced tax-driven incentives to shift investment and profits offshore.
It’s important to note that China’s corporate tax rate is 25%. Since China doesn’t have states levying local taxes on top of federal, its corporate rate is effectively lower than our current rate.
Tax reform dramatically narrowed the gap between the U.S. tax rate and foreign earnings, and it encouraged investment. It became cost-effective for companies to remain in or return to the U.S., saving thousands of jobs.
U.S.-based companies became competitive again. In the two years following the Tax Cuts and Jobs Act, businesses increased their acquisitions of foreign assets and companies by nearly 50%. Foreign acquisitions of U.S. assets and companies declined by 25% over the same period. U.S. companies remained competitive on a global scale while investing in domestic markets.
These improvements led to major gains for our workers and families. Under former President Donald Trump’s pro-growth policies, the public saw more take-home pay, higher wages, increased investment, and the lowest unemployment rates in a generation. The results speak for themselves. The Tax Cuts and Jobs Act modernized the tax code and incentivized domestic growth. That should be our north star, a return to economic policy that helps job creators and workers alike.
Unfortunately, the Biden administration is determined to dismantle anything accomplished under Trump, regardless of its benefit to the public.
Biden’s proposal reverts us back to a pre-Tax Cuts and Jobs Act economy, a tax code written before e-commerce existed. His proposals erode the progress made over the last four years. He calls for raising our corporate tax rate even higher than communist China. He wants to double the minimum tax on foreign earnings of U.S. companies and negotiate with Russia and China to keep their taxes high. (There’s no reason to believe they would.)
This would not only make our companies uncompetitive in the global marketplace but also harm domestic investment and job creation.
Make no mistake: Despite rhetoric from the Biden administration, the burden of these tax hikes will fall on workers and families. I can’t think of a worse time to do this.
The Biden administration wants you to believe that tax policy must be either pro-worker or pro-business, that if you’re for one, you must be against the other. That’s just not true. We can grow domestic business opportunities while also motivating wage growth and job creation. Good, sound tax policy can accomplish both.
Rep. Kevin Hern represents Oklahoma's 1st Congressional District in the U.S. House of Representatives.
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