On demand. The Internet of things. The gig economy. Although the taxonomy used to refer to the future of work has evolved, public policy affecting business and their workers in the United States has failed to keep up.
Congress has an opportunity to change that by passing comprehensive tax reform this year. Indeed, there are signals that this ambitious goal is possible. The so-called Big Six released a unified framework at the end of last month that has sparked enthusiasm from those with a variety of vested interests. Last week, the House of Representatives passed a budget that will set the terms for the tax debate moving forward, and the Senate is poised to do the same next week.
As tax reform begins to crystalize, the response from those content to maintain the status quo has been as expected: the president’s detractors have tried to paint the tax reform framework as a giveaway for the rich, inventing data to confirm their hypothesis.
As in so many public policy battles, the Left has decided that the future is binary. They contend that earners down the income scale cannot find advantage in a tax overhaul that also benefits business. Personally, I look forward to Democrats defending this position in 2018. Holding simplification of the crony tax code hostage to satisfy their class warfare talking points should serve well the ten Democrats fighting to hold their seats in states Trump won.
We Don’t View Tax Reform as Zero-Sum
The assumption that business and workers can only benefit in a tax overhaul at the expense of one another belies the real-world experience of work, in particular the way young people today interact with business. Data from 2016 shows millennials focus on entrepreneurship more than any other generation: more than 62 percent of millennials have considered starting their own business and nearly three quarters believe that startups and entrepreneurs are “essential for promoting innovation and jobs.”
Smart politicians would note that 2016 also saw millennials and Gen Xers overtake baby boomers as the largest swath of the electorate. Current trends suggest millennials will be the largest voting bloc in American politics in the next decade. A recent PwC study warned employers looking to attract young talent: “If they don’t go to work for your competitors, many of this generation will set up their own businesses. Digital technologies offer millennials an unprecedented opportunity for creativity and entrepreneurism. Right now 35% of employed US millennials say they have started their own business on the side to supplement their income.”
Put another way: more than one-third of the largest generation in the American workforce is both a worker and a business owner. One-dimensional public policy that cannot reconcile the needs of business and workers will not only fail, its proponents will alienate the electorate they can least afford to dismiss.
Get These Barriers Out of Creative People’s Way
Our tax code should invest heavily in progress and provide certainty for the future, making it easy for young enterprise to succeed. President Trump has been clear he intends reform to make the tax code work for this generation of workers. A tax code that gives them the opportunity to become the next generation of American employers should be the goal.
Although enthusiasm for entrepreneurship is at an all-time high, the number of new start-ups remains low, due in part to uncertainty created by our current tax code. The tax and regulatory regimes have become so onerous, Home Depot founder Bernie Marcus once mused that today, “Home Depot would never get off the ground.” Now the founder of Job Creators Network, he also warned: “today government figures out every way to stop entrepreneurs. And, I’ll tell you what, a country that is not supportive of entrepreneurs is not going to succeed.”
Fortunately, the framework released last month describes many policy changes that would benefit entrepreneurs and their employees. An unprecedented rate cut for small business is a hugely important component that will keep small employers competitive in a global economy. Allowing businesses to deduct the full costs of their capital investments in the year they are made would vastly simplify the tax code and induce owners to invest profits back into their businesses. Streamlining additional components of the personal side of the tax code, including eliminating the Alternative Minimum Tax, which forces earners to calculate their taxes twice, will make America not just the best place to work, but the best place to start a business as well.
For too long, Democrats have been allowed to construct a false choice between tax relief for workers and for businesses. In a country that is as innovative and dynamic as the United States, policymakers who subscribe to this false choice reveal a lack of imagination at best, and an ignorance of the American reality at worst.
The American relationship with work has evolved to be multi-dimensional. If our workforce isn’t binary, why should our approach to reforming the tax code be?