Jan 04 2016
Bipartisan Deal Could Lead to More Comprehensive Tax Reform
One of the last pieces of legislation passed by Congress in 2015 promises to pave the way for urgently needed reforms to the confusing and outdated U.S. tax code – now more than a staggering 74,000 pages. The “Protecting Americans from Tax Hikes (PATH) Act,” signed into law on December 18, is a major bipartisan win in favor of creating a better tax system.
Greater Certainty for Financial Decisions
The “PATH Act” offers families, job creators, and entrepreneurs greater confidence and more stability to plan for their futures. By extending or making permanent dozens of helpful tax provisions, the legislation will help support the innovation and investment necessary for long-term economic growth and job creation. In the past, many tax provisions were extended for a year or two, leaving important financial decisions and ventures in limbo.
American taxpayers should not be saddled with uncertainty about their finances because of annual action or inaction in Washington. People know how to spend their money better than the government. The “PATH Act” puts to rest concerns about the future of the child tax credit and earned income tax credit, as well as tax credits for research and development, small business expensing, and charitable giving from Individual Retirement Accounts. In addition, the legislation supports students with incentives to save for college and helps elementary and secondary school teachers with exemptions to cover certain school expenses. It gives farmers and ranchers the certainty to invest in needed equipment and facilities.
Suspension of Harmful Obamacare Tax
Changes to the President’s unworkable health-care law are also avenues for tax relief and economic growth. For example, the “PATH Act” puts a two-year moratorium on Obamacare’s medical device tax. In addition to voting for a full repeal of Obamacare, I have repeatedly supported overturning this harmful tax, which remains one of the law’s costliest.
The “PATH Act” is not the first time that Republicans and Democrats have recognized that the medical device tax could be bad for the economy, potentially eliminating tens of thousands of jobs and leading to higher costs for consumers. A repeal of the medical device tax earned bipartisan support during the budget vote-a-rama in the Senate in March 2013. Last year, a survey by the Medical Device Manufacturers Association showed that 72 percent of companies slowed or suspended job creation because of the tax. Even more of the survey’s respondents said that they would hire more employees if the medical device tax were repealed.
Greater Economic Growth at Stake
It has been nearly three decades since the last comprehensive tax reform passed Congress, but that could change given the substantial gains made by the “PATH Act.” There is no doubt that a simpler and more efficient tax code could unleash the U.S. economy in groundbreaking ways. Rather than sending more money to Washington, America’s small businesses could stay competitive by using more of their capital for higher-paying jobs, equipment, and research. Entrepreneurship could flourish, and greater economic growth could promote more tax revenue for the federal government overall. The “PATH Act” is just one step toward these significant goals, but it is a promising start that should be pursued in 2016 and beyond.