GOP framework for tax reform is a good start

It’s been more than 30 years since the last major overhaul of our federal tax code, and taxpayers haven’t had much good news since then. As the tax code has become more complicated and burdensome, it’s become less equitable and economically beneficial.

Rather than serving as a motor, powering continued economic growth, our tax code more resembles an anchor, weighing down the economy and hamstringing U.S. businesses trying to compete internationally.

However, with tax reform on the congressional agenda this year, there may finally be reason for taxpayers to be optimistic. The framework recently released by the president and congressional Republicans is certainly a good start. It offers both a reduction of the overall tax burden and simplification of the entire tax code.

The most important aspect of tax reform should be tax relief, and the Republican framework would allow taxpayers to keep more of what they earn.

Taxpayers would see their standard deduction nearly double to $12,000 for individual filers and $24,000 for married couples, and the child tax credit would be significantly increased, a major help to working families. The individual alternative minimum tax (AMT) and death tax would be eliminated, and most taxpayers would also see lower tax rates as a result of simplifying the code.

After more than three decades of various exemptions, incentives, carve-outs, loopholes and other insertions, many serving only a narrow and special interest, the tax code has become incomprehensible to all but tax professionals.

The Republican framework makes simplification of the code a major component of reform. For instance, most itemized deductions, with the notable exception of home-mortgage interest and charitable contributions, would be eliminated and returned to taxpayers by increasing the standard deduction.

The seven current individual tax-rate brackets would be reduced to three — 12 percent, 25 percent and 35 percent. We could have a tax system that allows most taxpayers to complete their tax returns on a single page.

Furthermore, the framework aims to spur economic growth and promote job creation by addressing the serious disadvantages U.S. businesses face when competing globally. Most business deductions would be eliminated and the savings used to cap the tax rate for small and family-owned businesses at 25 percent and to cut the corporate tax rate, among the highest in the world, from 35 percent to 20 percent, placing it just below the international average.

Profits earned abroad would be exempt if repatriated to the U.S., providing the economy with an investment of as much as $2.5 trillion. U.S. companies would have less incentive to move operations and capital overseas to ease their tax burden, and the framework takes steps to eliminate the use of tax havens.

I’ve been a principal champion of enacting laws to make Arizona’s own tax code more simple, equitable, fair and economically stimulating, and we’ve made great strides in recent years. Although there is more work to be done, our property, sales and income-tax systems are considerably easier to comply with and more competitive regionally, nationally and internationally than ever before. We should do the same with the federal code.

Obviously, the difficulty of translating the proposals in the Republican framework into legislation capable of passing Congress and being signed by the executive can’t be understated — there’s a reason the tax code hasn’t been overhauled since 1986. But the alternative is trying to explain to voters how our elected officials in Washington squandered a rare opportunity to provide meaningful tax relief and spur economic growth and job creation. It’s time to act.

J.D. Mesnard, a Republican from Legislative District 17, is the House speaker of the Arizona Legislature. Email him at jmesnard@azleg.gov; on Twitter, @JDMesnard.