American Businesses

(3) The Impact of Sensible Tax Reform upon American Businesses

Businesses in this country pay high taxes. The principal taxes paid are payroll taxes (i.e., Social Security and Medicare taxes -- more than $500 billion in 2014) and income taxes ($321 billion in 2014). [Note that our businesses pay much more in payroll taxes than in income taxes!] Under STR, both business payroll and income taxes will be completely eliminated. In addition, since businesses will no longer be subject to paying taxes, they will have very little tax-compliance burden—or compliance costs. The reforms will effectively “untax” American business.

Sentible Tax Reform will open a new chapter in business efficiency and competitiveness. Managers now frequently complain of being hamstrung by excessive government tax regulation, compliance burdens and heavy taxes. Companies pay more than $800 billion in federal taxes plus an estimated $165 billion in compliance costs—almost a trillion dollars in all. Those are all tax costs that businesses pass on to customers as higher prices, to workers as lower wages or to shareholders in poorer economic performance and lower dividends.

The burden of our current federal tax system makes our businesses less competitive against their global competitors. It hurts both our exports and our ability to compete against cheap imports. The economy of the United States is much larger than the size of China's, and five times the size of Germany's, yet both countries export much more than we do. We are clearly underperforming globally, which seriously hurts our economy. Although we benefit a great deal from global trade, we would benefit much more if our businesses were better able to compete in world markets.

• The elimination of business tax costs will allow American businesses to:
  
  • Lower prices.
  • Increase investments.
  • Reduce debt pay higher dividends.
  • Increase retained earnings, and
  • Better reward their employees.

All of these will greatly benefit businesses, their customers, their employees and the overall economy. U.S. exports will increase substantially. Imports will decline. Our balance-of-trade deficit will fall. America’s need to borrow from foreign governments and investors will be greatly reduced. Millions of jobs will be created in this country. And, business profits will increase greatly.

One of the key goals of Sensible Tax Reform is to “un-tax” businesses in this country and to liberate them to compete more successfully against foreign companies.

• For businesses, there will be an elimination of:
  
  • All federal business income taxes,
  • All business Social Security and Medicare taxes,
  • The business alternative minimum tax (AMT),
  • The need for businesses to collect income and Social Security taxes from their employees, and
  • The obligation for complicated and expensive federal tax-compliance.
    
• There will also be a great simplification of business planning and financing.
• And, all businesses will be treated alike.

Although retail businesses will collect the new federal consumption tax (FCT), businesses will not themselves pay any FCT.