With U.S. Senator Chuck Grassley
Q: Will the federal tax code finally receive a long overdue overhaul?
A: If there’s one issue that unites Americans, it is the need to simplify the nation’s tax laws. The rules and regulations spelling out the itemized deductions, credits, exemptions, phase-outs and tax brackets frustrate hard-working taxpayers year after year, adding a costly burden to many households and businesses who hire professional advisers to help prepare their tax returns. Tax fairness and simplification would make our tax collecting system more effective and efficient. What’s more, pro-growth tax reforms would unleash investment, foster higher wages and trigger job growth on Main Street. I’m all for seizing this opportunity to pursue comprehensive tax reform. Our economy will grow more if Washington takes less just as the national debt will grow less if Washington spends less.
Q: What about estate tax reform?
A: In January I co-sponsored the re-introduction of bipartisan legislation that would permanently repeal the punitive, confiscatory federal estate tax on American families. The Death Tax Repeal Act of 2017 would signal the death knell to the death tax once and for all. Under current law, family farms, ranches and small businesses are in the cross-hairs of a federal tax policy that slaps an extraordinary tax penalty on survivors after the death of a loved one. Current law applies a 40 percent death tax on estates valued more than $5.45 million. That may seem like a high threshold to reach before the federal estate tax applies, but consider a family business that’s served a community for decades -- providing employment and supporting local charities and youth groups -- or a family farm that’s paid down its debt on the land over a lifetime and is essentially asset-rich and cash poor. The federal estate tax may force family members to liquidate to pay the death tax. It’s harder than ever for families to pass down the family-run farm or business from one generation to the next. The death tax creates financial hardship for family businesses to survive and thrive. U.S. tax policy shouldn’t throw sand in the gears for family businesses that want to grow, innovate and create more jobs. After a lifetime of work to grow their business, earn a living, raise a family, create jobs and pay their share of taxes, it’s wrong for Uncle Sam to swoop in and lay claim to a lion’s share of the estate of the deceased.
Q: What other reforms are on the table?
A: Any blueprint for comprehensive tax reform needs to prioritize fairness, simplification, U.S. jobs and economic growth. Washington hasn’t enacted major tax reforms since 1986. So we are examining 30 years of tax policy, layer by layer, to clear the way for more investment, growth and prosperity. Overregulation and higher taxes make it harder for start-ups to get off the ground and for existing businesses to grow, hire and increase wages. Although there is broad agreement that the time is ripe to update our outdated tax code, the devil is in the details. Simplifying the tax code ought to help individuals and businesses pay what is legally owed, not a penny more, nor a penny less. Beyond tax fairness and simplification, consensus is harder to build because reforms invariably create winners and losers. Changes to individual brackets for ordinary income, tax rates on investments, personal exemptions and itemized deductions would require plenty of give and take to reach the president’s desk. Beyond that, special interest tax breaks and tax expenditures would open Pandora’s box and that would really make the debate interesting.
There is agreement that fixing flaws in the corporate tax structure would help level the playing field with our trading partners and boost economic growth and tax revenue here in the United States. Today U.S. tax policy serves as a barrier for businesses to keep jobs and profits at home. Perverse incentives are used to keep revenue off-shore. America needs to export goods and services, not jobs. There’s serious discussion under way in the House of Representatives – where tax policy typically begins -- regarding border adjustment policies that would require serious review to consider their impact on the economy and American consumers. There’s also President Trump’s plan to reduce the corporate tax rate from 35 percent to 15 percent to bring our system more in line with competitors. Reforms on the table for individual taxpayers include simplifying marginal tax brackets, such as collapsing the current seven rates to three and increasing the standard deduction.
As a member of the tax-writing Senate Finance Committee, I will be closely involved in the debate and will examine every detail to take into account how any changes would affect taxpayers, farmers, manufacturers, businesses and consumers in Iowa. We need to be careful about potential violations to our trade agreements, as well. The last thing the economy needs is a retaliation war with our trading partners. While comprehensive tax reform is no guarantee, it is a priority for the White House and Republican majority in Congress. However, I can guarantee that it won’t be easy. And without question, it will require the president to be on board, serious bridge-building in Congress and consensus among the American people to make it happen.