Tiberi: Tax reform done right will grow jobs and grow paychecks … our future prosperity depends on it
"The Joint Economic Committee is holding this hearing because entrepreneurship matters. It matters because startup businesses drive the innovation that fuels economic growth and opportunity. And very importantly, entrepreneurs matter because nearly all the gains in job creation come from businesses less than a year old – true startups.
"The bad news is that the rate of startups has been declining over the past few decades. That decline became an outright collapse during this recovery when – for three straight years – companies closed their doors more rapidly than they were opened.
"During similar periods in recent recoveries, the greatest gains in the number of American companies occurred during the Reagan Administration, perhaps not coincidentally when tax rates were falling. In contrast, this recovery saw only about a fifth of the business growth. That has real consequences for middle-class families.
"According to analysis by the Economic Innovation Group, each startup creates an average of six jobs. Plentiful startups and jobs create a virtuous cycle where potential entrepreneurs are more willing to take a risk on a new venture. By the same token, weak levels of entrepreneurship and job creation create a downward spiral for both.
"Another alarming trend is that the number of places where startup growth is actually happening is shrinking, a topic we investigated in a hearing earlier this year. From 2010 to 2014 half of all business growth occurred in just five metropolitan areas. Blighted areas across the country are desperate for new businesses and the jobs and opportunities that come with them. That is why I introduced the bipartisan Investing in Opportunity Act to attract capital and investment in distressed communities, and I hope it can become part of tax reform.
"Tax reform is a key tool in our policy arsenal that could remove artificial barriers to starting a business and foster an environment where entrepreneurship can thrive.
"Truth be told, entrepreneurs probably don’t think much about taxes when they launch a startup, and they shouldn’t have to. But before long they are hit with mind-numbing complexity that drains precious resources from the business.
"They may spend every dime of profit buying expensive equipment to scale up production, but the tax code may not allow them to immediately deduct the cost. That means they’ll owe taxes on profits they no longer have.
"If they do manage to become profitable, startups that are corporate taxpayers will face the highest rate in the developed world, and successful startups that pay individual taxes because they’re set up as pass-through businesses will face an even higher individual rate that has increased dramatically recently.
"The tax code also punishes success by forcing family business owners to do costly estate planning so the death tax doesn’t steal their ability to pass the business to the next generation of entrepreneurs.
"In this increasingly global economy, entrepreneurs can start or move a business anywhere in the world. Yet our tax system is out of step with our competitors.
"Tax reform done right will grow jobs and grow paychecks, helping restore the virtuous cycle that gives entrepreneurs the confidence to take a risk and reach for the American dream. Tax reform done right will provide them with more capital, the lifeblood of entrepreneurs. And it will help make America the best place in the world to invest and start a business. Our future prosperity depends on it."
