The word “pivot” is overused in our political discourse. Case in point: I’ve heard a lot about the president and Congress’ recent “pivot” to tax reform, as though the effort is only now beginning.
The truth is the current tax reform effort is years in the making.
In fact, when I took over as the lead Republican on the Senate Finance Committee in 2011, the committee and its members were focused and anxious to study, examine and vet policies to remake our tax system to meet the demands of today’s economy.
For the last six years, our committee has published numerous options papers and a 200-plus-page book on tax reform. Our bipartisan working groups have produced several reports of their own. And we have held 70 separate hearings on tax issues.
That work took a leap forward early this year when leaders from both chambers of Congress and the administration started working together to produce an agreed-upon framework for drafting tax reform legislation. Since then, we were able to resolve a number of fundamental differences, which led to the unveiling of a unified framework to help fix America’s outdated and broken tax code.
It is remarkable that key leaders in Congress and the executive branch are able to come together on such complicated and divisive issues. It’s hard to remember the last time that has happened.
But here we are. And there’s a lot to like in this framework, particularly if you are a middle-class taxpayer.
For example, our framework significantly expands the standard deduction, which will effectively cut taxes for tens of millions of middle-class families in Utah and across the country and ensure that many low- to moderate-income earners owe no taxes at all.
Only the highest earners will have to navigate through itemized deductions — the many existing credits and deductions that overwhelmingly favor high-income earners will be eliminated or reduced.
Our framework also expands the Child Tax Credit, giving additional relief to low- and middle-income families and simplifying the complicated rate structure for individual income taxes.
Combined, these reforms spare the American people much of the billions of dollars and countless hours they currently spend each year on tax compliance.
The middle class will also benefit from business tax reforms in our framework.
The United States currently has the highest corporate tax rate in the industrialized world, which is a drag on economic growth and job creation. Under our framework, the corporate tax rate will be lowered from 35 percent to a target rate of 20 percent.
Our framework would further provide a separate 25 percent tax rate for small-business income that is now taxed on individual returns. This reform will allow these proven job creators, who employ roughly half of our nation’s workforce, to grow and invest more in their workers and payrolls.
And, under our framework, America will transition from its current antiquated system of worldwide taxation to a more modern territorial system.
Added together, these reforms will ensure our business tax system allows American workers and job creators to better compete globally, increase wages for employees and create and retain more jobs and investment here in the United States.
Contrary to what some may say in the coming days, the unified framework will not cut taxes for the richest Americans. The proposal will maintain the current tax code’s progressivity, and a number of people in the highest brackets will likely see their tax burdens go up. Further, these reforms will not explode the deficit — they will provide a fiscally responsible investment in American workers, middle-class families and our economy.
I see our framework as a watershed moment for tax reform. It will launch a robust legislative process starting with the tax-writing committees in the Senate and House that will now draft legislation with the shared goals outlined within this framework.
This will undoubtedly be a difficult process.
However, when you consider the benefits of tax reform for families, workers and businesses in Utah and throughout the country, the cost of doing nothing is far too high for our country to bear.
Tax reform will be a catalyst to allow hardworking American families to keep more of their incomes and businesses to grow, hire, invest and compete here and abroad. After too many years of sluggish economic growth and stagnant wages, the time for tax reform is now.
Orrin Hatch is the senior U.S. senator from Utah and serves as the U.S. Senate Finance Committee chairman.