Pete Sessions Plan for Tax Reform
Our rapidly growing national debt is one of the most pressing issues facing the future of our great country. The United States cannot continue to run huge federal budget deficits. Financing federal overspending through continued borrowing threatens to drown Americans in high taxes and heavy debt leading to a less prosperous future.
Since 1970, the annual federal budget has been balanced during only one four-year period and the federal deficit has climbed from $400 billion in 1970 to over $16 trillion today. If we continue on our current path, in 10 years 95% of all federal tax revenues will be consumed by payments of interest on the national debt and mandatory programs like Social Security, Medicare and Medicaid. This will leave only 5% of our annual tax revenue available for funding national defense and other essential functions of the government.
Our national debt-to-GDP ratio rivals that of countries like Ireland, Portugal and Greece, which are facing sovereign debt crises. By the end of this decade, the federal deficit will climb to (and remain at) no less than 100% of our GDP. According to economists, once the nation’s debt exceeds 90% of GDP, it begins to stifle economic growth. President Obama has set the wrong kind of new record. The national debt has increased faster under his administration than under any other president in history. This runaway government spending paralyzes the job market, erodes confidence among America’s employers and has caused the worst economic recovery since the Great Depression.
Thanks to the insistence of House Republicans, discretionary spending in 2016 has been pushed back all the way to 2008 levels. Consistent with the governing philosophy we shared with the American people when we won back the House in a historic victory in 2010, our spending victories have driven the annual deficit from $1.412 trillion in 2009 to $544 billion in FY2016. And we’ve achieved this significant deficit reduction while at the same time enacting $620 billion in permanent tax relief, including a five year extension to bonus depreciation.
Because our current path threatens our economy and is unsustainable, I have joined House Republicans in putting forward a pro-growth tax reform plan that fundamentally changes our tax policy. By lowering rates, increasing the standard deduction, streamlining seven tax brackets into three and eliminating a host of special-interest provisions, our plan simplifies the tax code dramatically for families and individuals. And by providing incentives for savings and investment, it fosters economic growth and job creation while ensuring that Americans spend far less time and money filing their taxes.
Under our plan, small businesses will no longer be taxed under the individual side of the code. Instead, they’ll benefit from a critical distinction between wage and business income. This allows for a lower tax rate for small businesses of 25%—the lowest tax rate on pass-through income since before World War II.
Job creators of all sizes will also be able to take advantage of full and immediate expensing on investments in new equipment and technology—another historic first. This zero tax rate on new business investment is a vast departure from today’s complex depreciation rules, which direct businesses to write off purchases over long and often arbitrary periods of time.
It also cuts America’s 35% corporate income-tax rate—the highest in the industrialized world—to a flat 20%. In a change designed to strengthen our global competitiveness, American job creators will no longer be taxed both abroad and at home on the same dollar of income. There will be a zero tax rate on dividends brought home to America.
The current IRS will not exist, but will be redesigned into three distinct service units—one staffed with expertise on business taxation, and another focused on state-of-the art customer service to families and individuals. A third, independent unit will be geared toward helping North Texans quickly resolve their unique tax challenges—in effect, a small-claims court for tax disputes so individuals and small businesses don’t spend thousands of dollars resolving minor tax issues.
I am dedicated to delivering a tax code for North Texans that truly works for them—one that is built on the principles of growth, simplicity, fairness.