The House Ways and Means Committee is holding hearings on tax reform in advance of major restructuring next year should a Republican win the White House.
Today, Rep. Roger Williams presents his plan to the committee. The congressman’s Jumpstart America legislation is a good plan, but I would make it better in these ways:
- Individual Income Tax Rates. Williams would reduce the current seven tax rates (10, 15, 25, 28, 33, 35, and 39.6 percent) to four (10, 15, 20, and 30). I would go to two rates (10 and 25), as envisioned in a previous Paul Ryan tax plan.
- Individual Savings. Williams would cut the top tax rates on dividends and capital gains from 23.8 to 15 percent. That’s great, but I would add Universal Savings Accounts to any tax overhaul, as I’ve proposed and Sen. Flake and Rep. Brat have introduced.
- Corporate Income Tax Rates. Williams would cut the federal corporate rate from 35 to 20 percent. I would slash it further to Donald Trump’s proposed 15 percent.
- Corporate Foreign Earnings. Williams would reduce taxes on repatriated foreign earnings. I would scrap worldwide taxation of corporations and go to a territorial system, allowing tax-free repatriation.
- Estate Tax. Williams would eliminate the estate or death tax. I agree.
- Depreciation. Williams would scrap the business depreciation system and go to expensing, or immediate write-off, of capital investments. I agree.
- Payroll Taxes. Williams would cut the federal payroll tax rate by 2 percentage points. Instead, I would allow workers to redirect 6 percentage points of the tax into private Social Security accounts, while cutting traditional benefits. To workers, that would feel like a large tax cut because they would gain ownership of their retirement contributions, which currently disappear from their paychecks into a government black hole.
The current tax code is a mess, and it should be overhauled. We should transition to a low-rate flat tax, and the Williams plan and my improvements would be good first steps.
So kudos to Rep. Williams for putting a specific pro-growth plan on the table. Other members of Congress should follow suit to aid the Ways and Means Committee in drafting legislation.