By Paul Guppy
On Thursday, Speaker of the House Paul Ryan visited the vast Boeing Everett factory, a building almost as large as Vatican City. You could say the Boeing plant is as massive and complex as the U.S. tax code, except the cutting-edge aerospace facility is far more efficient.
The purpose of Speaker Ryan’s visit was to tout Republican ideas for passing sweeping tax reform, a major agenda item Congress will likely take up later this year.
In these cynical times, though, it is natural to ask: How much can the actions of a distant and sometimes-dysfunctional Congress help families in the Northwest? The answer is: a lot.
Washington state is rightly known as a gateway to Asia and the world, sending ships across the Pacific filled with top-quality technological, manufactured and agricultural products to eager customers around the globe.
But often the greatest challenge facing Washington business owners and working families is not the breadth of the ocean but the narrow-mindedness of policymakers in Washington, D.C.
Before Northwest entrepreneurs can hire one worker or sell one unit, whether it’s apples or airplanes, they have to comply with and pay for a thousand forms, rules, regulations and taxes imposed by officials in the national government.
Now one of our nation’s elected leaders has come to our region with a bold offer of relief. Speaker Ryan says he wants to reduce the amount of money the federal government takes from its citizens. The message is a refreshing one in a region where state and local officials regularly press to get more tax money, and seldom say “thank you” for the taxes we pay now.
Meaningful tax reform could ignite the type of growing economy Northwest families and business owners saw in the 1980s and 1990s. President Reagan and Democrats in Congress cut taxes and saw annual growth rates soar, bringing jobs and greater opportunity to everyone. It happened again under President Clinton, when the digital revolution produced yearly growth rates in excess of 4 percent. In comparison, recent growth rates have been well under 2 percent.
If Congress can pass the most positive and broad-based tax reform in a generation, those days of economic prosperity could come again.
In Everett, Speaker Ryan outlined his vision for radically improving the U.S. tax code, based on principles of fairness, lower rates and a broader tax base. Here are the plan’s three best features.
First, it would reduce tax rates. At 35 percent, the United States has the highest corporate tax rate in the world. Republican lawmakers say they want to bring that closer to the global average of 22 percent. When policymakers cut business taxes, private-sector managers have more to invest in their companies, and that means more money for higher pay and more jobs for workers.
Second, it would cut tax rates for families. Speaker Ryan says Republicans want to cut the highest rate on families from 39.6 percent to 33 percent, and reduce the current seven tax brackets to just three brackets of 33 percent, 25 percent and 12 percent.
Third, it would protect more family income from tax. Speaker Ryan says Republicans want to increase the standard deduction, meaning working families could earn more and pay no income tax.
Wisely, the plan would keep policies that benefit families most, such as full deductions for home mortgages, saving for retirement, and charitable giving.
Fewer tax brackets and a simpler code would make it easier for families to comply, thus reducing society’s fear of the IRS.
The plan would end special interest give-always and corporate carve-outs that have crept in over the decades. This has the double advantage of raising revenue for the government and simplifying the tax code at the same time. That was the secret to the bipartisan success of the 1986 reform — cutting rates while closing loopholes.
Speaker Ryan’s visit to Everett could signal the turning point that will super-charge our weak economic recovery. By passing once-in-a-generation tax reform using the balanced approach of lower rates and closing loopholes, Congress can bring lasting economic prosperity to business owners and working families in the Northwest and across the nation.
Paul Guppy is vice president for research at the Washington Policy Center, a research and policy advisory group addressing education, the environment, government reform, health care, small business, transportation and agriculture.