Renacci’s bold tax reform plan garners bipartisan support

U.S. Rep. Jim Renacci (R-OH) recently told the Ripon Advance his plan to transform the United States’ tax system into the most competitive in the world by eliminating the corporate income tax and replacing it with a consumption tax is drawing bipartisan support.

“We really need to simplify the system, and at the same time, we have to make our businesses more competitive globally,” Renacci said in an interview with the Ripon Advance.

Renacci’s Simplifying America’s Tax System (SATS) plan would repeal the corporate income tax and replace it with a seven percent value-added tax, a major reform expected to fuel economic growth and encourage domestic investment. While Renacci pointed out that other countries have a similar charge on goods and services, no other major country has eliminated its corporate income tax.

The SATS plan also calls for lowering individual tax rates for all taxpayers.

“We have the highest tax rate in the world,” Renacci said. “And that’s why we have businesses that are leaving our country. From an individual standpoint, we’re too complex. It takes taxpayers too long to do their tax returns.”

The United States is one of only three countries in the Organisation for Economic Co-operation and Development (OECD) that has not cut its corporate tax rate since 2000. The average corporate income tax rate among the 35 countries in the OECD is under 25 percent.

Renacci, who serves on the House Ways and Means Committee and Budget Committee, said that the impetus for his tax plan stemmed from Congress’ inability to enact comprehensive tax reform in 2015. With the help of two tax attorneys hired by his office and in consultation with the Tax Foundation, Renacci’s tax plan took more than a year to develop.

Renacci’s main tax reform priorities focused on achieving the most competitive tax plan in the world, simplifying the corporate tax system as well as the individual tax system, and garnering bipartisan support.

Feedback gathered from members of the House Ways and Means Committee shows interest in the plan from both Repbulicans and Democracts, Renacci added.

“(Democrats) like the idea of a consumption tax, which surprised me,” Renacci said. “They like the idea of making sure we kept the child tax credit and Earned Income Tax Credit in our individual plan, which we did. They also liked the idea of taking repatriated dollars and putting it into the Highway Trust Fund — which I was never in favor of — but I’m willing to do that as a compromise.

“What they really like is that the after-tax income of the lowest percentile of taxpayers increases under my plan, even taking into consideration the consumption tax.”

For individuals, Renacci’s plan would increase the standard deduction, eliminate the marriage penalty, retain the Child Tax Credit and expand the Earned Income Tax Credit. It would also dedicate $185 billion to the Highway Trust Fund from one-time deemed repatriation.

The Tax Foundation, an independent tax policy research organization, said that Renacci’s plan would significantly reduce marginal tax rates and the cost of capital, which would lead to 5.6 percent higher GDP over the long term and 1.9 million additional jobs.

“This would increase the revenue that the tax plan would ultimately collect, making the plan slightly revenue positive,” the Tax Foundation said in an analysis of the proposal. “Rep. Renacci’s plan would increase after-tax incomes for taxpayers at all income levels.“

The next step for Renacci’s tax reform plan is to have the Joint Committee on Taxation analyze the proposal using a tax scoring model that evaluates the impact taxes have on the economy.

Renacci said that the response to the SATS plan from the business community so far has been positive.

“Most multinationals that we talked with said it would make it better to incorporate and do business in the United States because we would be the most competitive,” Renacci said.

Renacci is also hopeful that the House Ways and Means Committee will hold hearings on tax reform before the end of the year.

“I’m looking forward to having hearings not only on my plan, but also on some of the details on the Ways and Means Committee’s Republican plan — and coming up with a better and stronger plan,” Renacci added.

The House Republicans’ tax reform blueprint, unveiled in June, lowers the corporate tax rate to 20 percent from the current 35 percent, among other proposals.

Renacci said that the House Republicans’ tax proposal moves the United States toward becoming more competitive by utilizing a consumption tax model and simplifies the tax system for individuals, both of which are positives.

“I think the key is making sure that we get that plan fully vetted, because that might be the best plan after we have some hearings,” Renacci said. “But as a tax practitioner and someone who has been in the business community for 30 years, the two things that make me most uncomfortable are the non-deductibility of interest and fully expensing buildings and large capital assets.”

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