Hamrick: Why is tax reform a key factor in stimulating jobs and economic growth?
Renacci: Our current tax system is too complicated and burdensome. Businesses can be fined for the smallest of issues and they need help from accountants Edinburgh to make sure they’re not getting overtaxed on trivial expenditures. Comprehensive tax reform will strengthen our economy and help businesses grow. Lowering the tax rate on all businesses and establishing a territorial type of tax system will not only encourage companies to retain their corporate headquarters in the United States, but also incentivize them to hire and expand domestically. Former Ways and Means Committee Chairman [Dave] Camp’s 2014 tax reform proposal, while not perfect, was a good starting point evidencing the positive effect that tax reform could have on our economy.
Hamrick: As a CPA you have a unique perspective into business. What reforms do you think will have the greatest impact in driving growth for businesses back home?
Renacci: First and foremost, a lower rate will have the largest impact on economic growth. Beyond that, reforms that reduce the tax code’s current bias against investment will encourage expansion, particularly in the small business realm. We also need to be aware that we compete in a global economy; therefore, we should consider enacting policies that not only prevent U.S. base erosion, but also encourage foreign investment that would increase research and development and related manufacturing in local economies across the country.
Hamrick: Your constituents consist of small, medium and large businesses, as well as businesses formed as corporations and pass-throughs. What measures are lawmakers taking to ensure that tax reform treats all businesses fairly? What are you hearing from your constituents?
Renacci: The question of income tax rate parity is a complex one, especially in a system that allows for various forms of legal operations – each with various tax considerations. It is also a challenge because this administration appears unwilling to even entertain lowering individual rates, which are the rates paid by owners on their business income from pass-through entities. The administration’s stance, as well as the fact that traditional corporations (unlike pass-through entities) face the burden of double taxation, have caused some lawmakers to focus on tax reform that would only lower the corporate rate, leaving unchanged the statutory rate on income from pass-through businesses. Those lawmakers still want to include pass-through entities in the business reform, but appear to be looking for other ways to lower the effective rate of pass-through entities without actually giving those entities a statutory rate cut. It is my hope that the administration changes their stance on individual rates and comes to the table to consider comprehensive tax reform for businesses and individuals. Ensuring that both traditional corporations and individual owners of pass-through entities are treated fairly under the code is a critical step toward improving our competitiveness and encouraging economic growth.
Hamrick: What provisions or part of tax reform do you see as the biggest tax challenge ahead?
Renacci: As discussed above, the greatest challenge will be the ability to undertake individual tax reform with the current administration, while at the same time ensuring that the tax code does not pick winners and losers based on how a business is legally structured.
Hamrick: Specifically, what tax provisions are most important to you and your constituents?
Renacci: According to the National Taxpayer Advocate at the IRS, Americans collectively spend more than 6 billion hours and approximately $168 billion each year to file their returns. As I travel around my district, I consistently hear that our tax system is inefficient and unfair. That is why, since joining the Ways and Means Committee, I have advocated for a tax code that will encourage our small businesses to grow, while also providing relief to individuals and families who continue to grapple with the complexities of our current system. Americans spend too much time and money to file their returns; it shouldn’t have to be that complicated. That is why I am committed to fighting for a tax system that not only lowers rates, but also results in significantly reduced compliance costs.
Hamrick: What tax reform provisions do you see moving forward during this Congress?
Renacci: Ways and Means Committee Chairman Paul Ryan has made it clear that tax reform is one of his priorities. Senate Finance Committee Chairman Orrin Hatch is also urging comprehensive tax reform. Recently, Chairmen Ryan and Hatch sent a joint letter to Treasury Secretary Jack Lew urging the administration to work with Congress to fix our broken tax code. I’m hopeful that, under the leadership of Chairman Ryan, we can all work together toward a simpler, fairer tax code.
Hamrick: Considering the limited window for reform in this Congress, what role do business leaders play in tax reform at this juncture? How can business leaders help/be a resource to lawmakers during the tax reform discussion?
Renacci: Business leaders can serve as a resource to Congress by communicating the effect that our current tax system has on their future business plans. For example, whether or not our tax system – and the uncertainty it creates – prevents them from creating new jobs or forces them to reduce their workforce. Small businesses are the backbone of our economy, as they account for approximately two-thirds of all new private sector jobs. That is why their input is important as we move toward comprehensive tax reform.
(This interview originally ran in Topic A: Tax & Finance)
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