During a hearing on business tax reform on Tuesday, U.S. Sen. Orrin Hatch (R-UT) said the current way businesses are taxed in the United States weighs on economic growth and places a burden on American workers.
Hatch, the chairman of the Senate Finance Committee, led the hearing to explore how business tax reforms could boost wages, improve the overall business climate and promote global competitiveness.
The latest hearing, which followed a hearing last week on individual tax reform, was part of the committee’s ongoing efforts to advance comprehensive tax reform later this year.
A recent Congressional Budget Office report found that the average corporate statutory rate, including state and federal taxes, ranks as the highest in the industrialized world at 39.1 percent.
Slowed economic growth due to hindered capital formation, bias against savings and investments due to low returns on investments, and incentives for corporations to shift income, production and assets overseas due to more favorable tax treatment were among the problems Hatch identified that stem from the current business tax system.
“In tax reform, we need to address all of these problems and distortions, and many others as well,” Hatch said in his opening statement at the hearing. “In particular, we need to lower the corporate tax rate to relieve the burdens the tax imposes on American workers, who, according to many economists, bear a significant part of the corporate tax.”
He also said that tax burdens should be reduced on pass-through businesses, whose earnings are reported and taxed on individual tax returns. Pass-through businesses include sole proprietorships, limited liability companies, partnerships and S corporations.
All current ideas for tax reform aim to help middle class and low income families, Hatch added, and the chief goals of business tax reform is to promote economic growth, support job creation and increase wages for employees.
“As the committee works through this process, with those goals in mind, I believe we will be able to demonstrate why those in the middle class should feel as though they have a stake in this discussion and how these ideas to reform our current system will help,” he said.
“Let’s keep in mind that the status quo — sluggish economic growth, stagnant wages and decreased workforce participation — hasn’t exactly been doing the middle class any favors. The case for tax reform should therefore be easy to make,” Hatch added.