How the Obamacare Flop Impacts Tax Reform

Radio America News

The implosion of the Senate's attempt to address Obamacare also makes effective tax reform more difficult, but the leader of the nation's largest grassroots taxpayers organization is still optimistic big things can get done. But make no mistake, repealing the Obamacare taxes was supposed to grease the skids for the tax reform effort. "The task has not been made easier by the lack of progress on Obamacare repeal and replace, but we're going to have to approach this with a lot of vigor right now. The American people are waiting to see that this Congress and this administration can get something comprehensive done," said National Taxpayers Union President Pete Sepp. How does the failure of the Obamacare repeal specifically impact the tax reform push? "We're going to have to deal with some of the Obamacare taxes in some fashion, through tax reform or outside of tax reform simply because several of those Obamacare taxes directly effect conventional income tax rates," said Sepp. "I'm talking about, for example, the earned income surtax of 0.9 percent, also the net investment income tax of 3.8 percent. Those types of taxes will actually increase the rate that members of Congress are trying to lower over the long term," said Sepp. Nonetheless, Sepp is bullish, even after watching the flop on healthcare in Congress because it appears congressional leaders and administration officials are all singing from the same songsheet this time. "That means lower tax rates, simpler tax filing procedures, making sure that small businesses don't pay a higher tax rate than larger ones and, in fact, should pay a lower rate. There are also things that will help to address the lack of competitiveness of our companies overseas and the tax disadvantages there," said Sepp. Sepp is pleased that the House Ways and Means Committee and the Senate Finance Committee are working in tandem on legislation rather than crafting completely separate bills. He also says GOP friction should ebb greatly now that all the major players agree to stop pursuing the Border Adjustment Tax, which would place taxes on goods entering the U.S. In addition, Sepp is excited about Republicans trying to drop the corporate tax rate from 35 percent to somewhere between 15-20 percent, and he says the rate for small businesses should be even lower. He also is hopeful that Congress can remove the massive paperwork burden for business owners. "We also need to look at how business claim their expenses and write them off. This is an incredibly complex area of the tax code. It amounts to anywhere between 30-50 percent of the paperwork burden that a business faces," said Sepp. On individual tax policy, Sepp wants to see Congress pursue much lower tax rates in exchange for removing the vast majority of deductions that are currently available to taxpayers. He says rates really need to plummet before that trade is a good deal for most Americans. "The rates range from 10 percent to over 40 percent currently. We need to get the rates down even lower, five percent or even zero if we expand the standard deduction and perhaps a top rate of 30-35 percent. If we do that, the trade off of deductions will be worth it," said Sepp. Sepp stresses that the status quo is not an option. He says America suffers more each year as America fails to use the tax code for our economic advantage. "Tax reform needs to happen because companies are inverting every day. They're taking their headquarters overseas and with it a lot of profits that could be taxed here. The tax code is getting more complex every year. Even if we don't pass new laws, implementing old ones and designing all the regulations around them add to that burden," said Sepp.