If the United States government can get tax reform “right,” the country will see its gross domestic product rise by 1 percent, according to the commerce secretary.
Wilbur Ross said that because it could add nearly $3 trillion in federal government revenue in the next decade, getting U.S. tax reform right is important.
Ross said that the tax program is the “single-most important thing” beyond the federal budget and the lifting of the debt ceiling.
Effective tax reform will “increase the gross domestic product growth by 1 percentage point, so 100 basis points,” he said, adding that in 10 years, that would amount to “$10 trillion more GDP, $3 trillion more revenues to the federal government.”
“Those are gigantic numbers even for a country the size of the U.S.,” he said, “so the tax changes could be transformative events.”
A crucial focal point for the Administration, particularly following the repeated failures to repeal and replace Obamacare is the passing of a comprehensive tax reform, one of President Donald Trump’s key campaign promises.
Introduction of what they call a “framework for tax reform” is being planned by Trump and House Republican leaders.
In addition to a reduction in the top individual rate, from its current 39.6 percent to 35 percent, that framework would reportedly include a major cut to the corporate tax rate, bringing it from 35 percent to 20 percent.
He would prefer a 15 percent corporate rate, Trump, who has pushed for lower rates for corporations, has previously said.
“We’ve not made an announcement. President Trump has indicated his goal and his hope would be to get as close to the 15 percent as we possibly can,” he said.
In the hopes that such a break would encourage them to bring those earnings back to the United States, another issue surrounding tax reform involves giving companies breaks on profits earned overseas.
Ross said “a very important objective” is repatriation of overseas bundles of cash. “We believe that there’ll be a vast amount of it brought back if the president’s notion of a very reduced rate on the immediate repatriation goes through.”
Firms passed along most of the benefits to shareholders in the form of share buybacks and dividends in a similar effort that was made more than a decade ago.
A near doubling of the standard deduction for both individuals and families would be included in the Republican tax reform plan, Trump has also said.
It was important to simplify the process of individual tax and reducing individual tax rates, particularly for the middle and low income people, Ross indicated.
“Guess how many hours Americans spend filling out their tax returns each year. Six billion,” he said. “Imagine how much better an economy we’d have if those six billion hours were devoted to productive activity, not trying to figure out the meaning of a 100-page tax instruction form.”
(Adapted from CNBC)