By Jeff Cardwell
Thirty-one years after President Ronald Reagan signed into law an historic and comprehensive tax reform package — groundbreaking legislation credited with revitalizing our nation’s economy and empowering American businesses to compete globally with unprecedented strength — President Donald Trump is poised to affirm his leadership as the nation’s chief executive to deliver the single-largest individual and business tax cut in history.
First and foremost, the president’s plan reaches far beyond the fundamental goal of growing our economy and creating jobs.
To achieve realistic results, tax reform and tax relief relies on a dynamic process that, not unlike dominoes, begins by creating a tax code that is simple, fair and, just as President Reagan achieved before him, eliminates again dozens of special tax breaks, decreases the number of tax brackets and provides for a lower top tax rate on individual income.
The number of tax brackets would drop from seven to three, at 10, 25 and 35 percent. The lower top tax rate on individual income was cut nearly in half from 50 percent to 28 percent in 1986, before increasing again to above 40 percent — when tax hikes created by the Affordable Care Act are taken into account.
In continuing with the momentum that is expected with tax reform is establishing a territorial tax system to level the playing field for American companies. This protection is in response to a dramatic shift, in which developing countries have moved from worldwide tax system to territorial systems.
With this change, countries impose taxes only on profits earned inside that country’s borders as opposed to taxes on profits earned by businesses anywhere in the world. The United States is one of just seven Organization for Economic Cooperation and Development countries with a worldwide tax system, whereas 28 other countries now have territorial systems in place.
Providing tax relief to American families — especially middle-income families — is a crucial component of tax relief with reforms that propose to double the standard income tax deduction while continuing to provide credits for child and dependent care expenses.
With these initiatives, a path to a bigger economy is possible, thanks to higher wages and better living standards. Among the other issues that are proposed to be simplified is protecting home ownership and charitable gift tax deductions.
At the same time, it is encouraging — as a small business owner — to know President Trump’s strategy is founded in adopting tax policies designed to drive growth by improving the supply of labor, physical and human capital and capitalizing on advances in technology and innovation.
Repealing the 3.8 percent tax created by provisions in the Affordable Care Act that have hit small business hard and its negatively impact investment income.
Making American business competitive again is imperative as other countries continue to aggressively cut their tax rates to attract business investment overseas and improve their economies. The Tax Reform Act of 1986 reduced the corporate tax rate from 46 to 34 percent.
At the time, the average corporate tax rate in the Organization for Economic Cooperation and Development countries was much higher at 47 percent. Since then, a dramatic shift in corporate tax rates in the countries, leading to a reduction of nearly 50 percent from 47 percent to 24 percent today. By contrast, the U.S. increased its rate to 35 percent and 39 percent when accounting for state tax rates.
Ushering in the next generation’s era of prosperity is moving forward. President Trump and the administration’s economic team is continuing its conversations with people across the country. And, this year, they have hosted a series of town hall-style meetings to discuss tax reform and tax relief.
The Trump Administration also have met with more than 200 Members of Congress on both sides of the aisle and hundreds of business leaders, economists and others. In the meantime, important work continues with the House and Senate members to craft legislation capable of passing in both chambers.
As we look ahead to the progress that is expected to move this ambitious and attainable plan forward, every Hoosier — and citizens across the country — should be encouraged by a forward-looking strategy that offers a once-in-a-generation opportunity to improve our quality of life through greater prosperity for more of our citizens and stronger, more forceful trade policies for the express purpose of making it attainable for American businesses to compete effectively worldwide.
Jeff Cardwell is the former chairman of the Indiana Republican Party and businessman who owns Cardwell Do-it Best Home Center in Indianapolis. Send comments to email@example.com.