I traveled with President Trump to Harrisburg last week as he made the case for tax reform to the American people. In the audience were American truckers who transport the food that feeds the nation, the materials that build our cities and towns, and the products that keep the country moving. Truckers are on the front lines of our economy and see firsthand the struggles hardworking Americans endure.
Economic recovery is not an academic exercise. Higher growth means trillions of dollars of economic activity and opportunities enjoyed by more Americans. The Trump administration is committed to jump-starting a return to faster economic growth with a bold new tax-reform plan that will provide much-needed relief.
I am committed to tax reform, which is necessary to lead us to the sustained growth that is critical to the success of middle-income families and small businesses. If we get this right, tax reform will spur what the president has called a “middle-class miracle.”
It has been more than 30 years since President Ronald Reagan passed tax reform. That was in 1986, and since then, our tax code has become uncompetitive for our modern economy. We have developed a framework to ensure that our tax code is fairer than the current system and works to create greater economic opportunities for all Americans. Individual and business tax reform will give U.S. workers the long, overdue pay raise they deserve. And a competitive tax system will stop major companies from leaving this country to do business abroad, which hurts American workers and families.
We plan to double the standard deduction for individuals to create a large “zero-tax bracket.” The first $12,000 of income for individuals and $24,000 for families will not be subject to federal income tax at all. For those who already take the standard deduction, this likely means more money immediately back in your pockets. For many who spend hours itemizing and collecting receipts, this is not just money back in your pockets, it is more time for things that are important. Our plan will allow 95 percent of Americans to complete their taxes on a single, easy-to-file sheet of paper. We will also simplify the system from seven brackets to three and eliminate many special-interest loopholes. When combined with our proposed increase in the child tax credit, these changes will allow the average family to spend more money and time together, and save for a more secure future.
We must also reform our business tax system so that American companies and workers can compete in the global economy. Our current “Offshoring Model,” with the highest business rate in the developed world, encourages companies to move overseas to countries with lower rates. We need to change this with an “American model” that reduces the corporate rate from 35 percent to 20 percent, incentivizing companies to create more better-paying jobs here.
Economists have found that more than 70 percent of the corporate tax burden falls on American workers. For proof, we need look no further than the impact felt by working families during the last administration. As noted recently by Council of Economic Advisors Chairman Kevin Hassett, corporate profits rose by 10.9 percent per year, but median wage growth for workers was only 0.6 percent per year. This is because firms kept 71 percent of their foreign-earned profits abroad, benefiting foreign workers instead of U.S. employees. Hassett estimates our plan will result in an increase of $4,000 in income annually for the median American family.
America was born in part because of unfair taxes, leading to the signing of the Constitution and Declaration of Independence in the great Commonwealth of Pennsylvania. This is why we should think more about Pennsylvania than D.C. when writing our tax laws. Tax reform is how we can once again grow this economy, so it is imperative for Congress to pass a comprehensive tax plan for the president to sign. We need to create massive economic growth in this country so that American families, workers, and small businesses can once again succeed.
Steven T. Mnuchin is the 77th secretary of the U.S. Treasury.