Federal tax reform can be a lifeline for Illinois

By: Illinois Republican Party Chairman Tim Schneider

The people of Illinois are no strangers to a state government that holds them back. For decades, Springfield has been controlled by insiders and powerful special interests who look out for themselves, not the people. Our government’s resistance to change has given us the highest-in-the-nation property taxes, higher income and business taxes, and even a new tax on sweetened beverages in Cook County.

The results have been disastrous for Illinois. Taxpayers and jobs have been fleeing our state for nearly two decades, putting pressure on state and local government budgets and the working families who have chosen to stay in Illinois. Neighboring Midwestern states like Wisconsin and Indiana have taken advantage of our uncompetitiveness, opting for pro-growth reforms and lower taxes to poach our businesses and residents.

For many more decades, the story has been the same for the Federal Government in Washington.

The last time Washington tackled tax reform in a big way was in 1986. Under the leadership of President Ronald Reagan, Republican and Democrat lawmakers in Congress came together to close special interest tax breaks and reduce tax rates for every single taxpayer and business, giving American workers and entrepreneurs a competitive edge in a global economy that was becoming more free and open to cross-border trade.

Unfortunately, the rest of the world quickly caught up. Foreign governments aggressively cut their business tax rates to spur investments and grow their economies.

In 1986, business taxes in the US were cut from 46% to 34%, while the average business tax rate for overseas OECD nations was 47%. Today, the shoe is on the other foot. The US business tax rate has increased from 34% to 35%, and when you incorporate state business taxes, that average is 39%. Businesses in OECD nations, on the other hand, have an average tax rate of 24%.

To make matters worse, powerful interests groups got their hands back on the tax code over the years, doubling it in size and adding special deals and loopholes at the expense of everyone else. Meanwhile, lawmakers turned a blind eye and American taxpayers and businesses suffered as a result.

As our competitive advantages waned, factories and manufacturing jobs left American shores. Our complex and cumbersome tax code hasn’t just affected employers, it has hit employees hard too.

Other than the obvious and tragic effect of destroying good, middle-class jobs, the size and scope of our tax code is a compliance nightmare. Nine out of every ten taxpayers use the services of an accountant or tax filing software. Many deductions often go unclaimed, while others require hours of clerical work. That’s more time and money spent complying with the law, and less investing in a family’s future. That’s wrong.

But now we have an opportunity to change that.

For the first time since the mid-2000s, we have a unified Republican government in Washington that is laser focused on prioritizing major, once-in-a-generation tax reform. President Trump, Majority Leader McConnell, and Speaker Ryan have made it a priority to get this done. Even many Congressional Democrats are hopping on board because they realize that this is not only good policy, but good politics. Their constituents demand tax reform.

Successful and effective tax reform must be guided by the following principles: increase wages, jobs, and economic growth; provide tax relief for the middle class; keep jobs in America; increase American competitiveness in the global economy; and simplify the tax code. Reducing tax rates, eliminating special interest loopholes, and encouraging investment here in America can achieve all of those goals.

If done right, tax reform at the national level could be a lifeline for Illinois businesses and families who are drowning under the policies of entrenched politicians in Springfield. The political class continues to protect the status quo, but our fight for reform in Springfield and Washington must go on. Let’s stand together and reform our tax code to give Illinois families a raise and build a stronger economy.