With tomorrow being tax day, many Americans begrudgingly file their taxes at the last minute. This is the perfect time to think about our tax system and how it works for us as a country. Really the truth is that it isn’t working for us. The U.S. tax system is ill-equipped to function in a global economy. We have opened ourselves up to globalization, yet we are unwilling to take the necessary steps to ensure our economic success. We need a system that modernizes the tax code and provides new life for our economy.
There are multiple problems with our tax system. For one thing, it is not collecting enough revenue to run our government without going into significant debt. Our current system is burdensome, complex and ineffective. Of those who qualified for the highest tax bracket only 1.8 percent of them paid taxes of 30 percent or higher.
Republicans would say we should just cut spending, but we have real needs that need to be addressed such as our failing infrastructure. Our infrastructure has fallen into disrepair and requires trillions of dollars in spending just to get it back to being safe and functional. Under our current system we have no way to produce the amount of funding we need to accomplish this.Clearly we need a better way of collecting revenue.
Our tax system also makes it easier for companies to put Americans out of work. America’s high corporate tax rate has made it profitable for companies to move their operations out of the United States. It has also made it more profitable and therefor easier for foreign firms to buy U.S.-based multinational corporations.
This is because U.S. firms are taxed at a high rate on their foreign earnings, while a foreign-owned company would not pay those additional taxes on non-U.S. earnings. This means foreign firms can make higher bids for U.S. multinational companies than U.S. firms can because the expected profits are higher.
It is time for a new, smarter tax system the Competitive Tax Plan. The plan starts with adding a national border consumption tax, which is used successfully by all of our trading partners. China brought in 20 percent of their revenue last year from their VAT.We should also lower our corporate tax rate to be competitive with other countries. These two steps combined would go a long way towards improving the health of American businesses.
Although many people are initially wary of a national border consumption tax, it would be the best way to make our tax system competitive when trading with other countries. A national consumption tax currently acts as a subsidy to foreign manufactures, which get a rebate when they export their product to the United States. If we export to them, our companies must pay our domestic corporate taxes plus have the foreign value-added tax (VAT) tacked on to the price of their product abroad. This renders us uncompetitive, and is proof we need a national consumption tax of our own.
We have been operating with an obsolete tax system for too long. Small tweaks to tax rates and closing loopholes will not make America prosperous again. We need a new, competitive tax plan – one that includes a national border consumption tax.
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