Favorable tax laws = capital investment = economic growth
To return to growth rates which the United States has enjoyed for years and to provide opportunities to hard-working Americans, our outdated tax code needs serious reform.
It is an inescapable truism that tax treatment affects the amount of capital investment, which in turn leads to job creation and economic growth. Both personal and corporate taxation will influence growth. Corporations invest directly to expand their business and create jobs while individuals save for themselves and their retirement by investing in the bonds and securities of these corporations, impacting their value and ability to expand.
A second inescapable fact is that capital is fungible. Like tending to a garden, where tax treatment nurtures investment, it will grow. Where tax treatment discourages investment, capital will move elsewhere. Just look at the difference between Texas and Florida versus Connecticut.
Reducing the corporate rates to 20 percent, and 25 percent for pass through entities, as proposed will stimulate corporate expansion. Simplifying personal taxes will remove an oppressive burden bearing upon all taxpaying Americans. The tax code is a decipherable labyrinth that requires hours to complete. Reducing rates for the lower personal income tax brackets will reduce the tax burden for those who most need relief.
Washington should look to the most successful states for ideas to generate growth. Here in Florida we have no personal income tax and low rates for other taxes which stimulate savings and investment. As an aside, we also have effective solutions to many other broken federal programs like Medicaid and parental choice in education.
Opponents of the proposed tax reform concepts, which are not finalized yet, argue that they will expand the deficit, but a growing economy creates additional income and tax payments. Hopefully the myriad of narrow, special interest, lobbyist created deductions and credits will be eliminated. I am fighting for elimination of the renewable fuels standards tax credits, which protects the ethanol industry, and the state and local tax deduction, which will provide 1.5 trillion dollars to offset tax reductions and simplification.
The last time the United States accomplished meaningful tax reform was in the Ronald Reagan era, a generation and a half ago. Congress must act now; our future depends on it.
Francis Rooney is the U.S. Representative for Florida’s 19th congressional district. He serves on the House Foreign Affairs Committee and the Committee on Education and the Workforce. He previously served as U.S. Ambassador to the Holy See under President George W. Bush from 2005 to 2008.