The movie industry in 2017 saw its worst box-office performance in over a decade. North American receipts were down over 14 percent since last summer. Films with big budgets fizzled and audiences yawned at sequels.
One title this summer bucked the downward trend, however. Wonder Woman grossed over $410 million domestically. (And it’s easily the best movie I’ve seen this year.) The film’s executive producer, Steven Mnuchin, apparently knows how to back a winner. He’s also produced such blockbusters as Mad Max: Fury Road, and The LEGO Batman Movie.
President Trump and Congress need a hit right now, too.
The task of delivering to the American people the tax package the country needs to return to at least 3 percent economic growth will be tested in Mnuchin’s latest role as secretary of the treasury, where he’ll be producing, directing, and starring in the effort of attempting to pass the first major tax reform package since the Reagan administration, and all without the help of Gal Gadot.
While he won’t have a Hollywood star to shepherd a bill to passage, Secretary Mnuchin will have the president and at least one telegenic leader in Congress, Paul Ryan, to help make the case. And while his acting résumé is thin, Secretary Mnuchin himself will have to deliver an Oscar-worthy performance to personally sell the tax package to Capitol Hill and to a skeptical American public looking for bipartisan solutions.
For tax reform to be a winner, it has to stay simple and go big in just two areas.
First, reduce the corporate tax rate to 15 percent, which would take us from the world’s highest corporate tax rack rate to one of the lowest. This will have a tangible, positive effect on workers’ wages, who currently shoulder much of their employer’s tax burden. A National Tax Journal study finds that every $1 increase in corporate tax revenue results in a $.60 reduction in employee wages. It’s time to put more money back into workers’ pockets and stop taxing their productivity.
Second, provide a very low rate to repatriate the estimated $2.5 trillion US companies have parked overseas, while accounting for future earnings by adopting a territorial tax system that is the norm among our international competitors.
The Bernie Sanderses of the world cry that corporate taxes as a percentage of government revenues have shrunk to around 9 percent. But that’s not because job creators’ taxes are too low, but because they’re so high that companies have gone looking for more welcoming shores. Let’s put that capital back to work in the US economy.
Both of these flaws in the US tax code are terribly harmful to the domestic economy. They stall job creation and they push corporate headquarters, manufacturing, and other jobs abroad. If these elements of our tax code were a movie, it would be called Dumb and Dumber.
If the momentum for reform really picks up, Mnuchin and company can take a stab at simplifying and modernizing a tax code that has become overly complicated and larded with so many credits, exemptions and deductions that even the best CPAs are left befuddled. But unless the corporate tax rate is reduced and the issue of US dollars parked overseas is addressed, any other reforms would be nibbling at the edges.
Dramatically reducing the corporate tax rate and bringing trillions in investment back to the US are the big, bold moves the US must make if it’s going to compete with countries like Ireland, Canada and the United Kingdom that have modernized their corporate tax codes in the over 30 years since the last big US reform.
The supporting cast members joining the call for tax reform this year are united in their belief that a reform package is long overdue and absolutely necessary. Heavy hitters like the US Chamber of Commerce, the National Association of Manufacturers, and the Business Roundtable are all reading off the same script on what a reimagined tax code ought to look like.
The Business Roundtable’s chairman, JPMorgan Chase CEO Jamie Dimon, has proven to be an especially good spokesman for reform, arguing in an op-ed last month that “Reforming the tax code is the single most important thing that Congress could do to jump-start our economy, create jobs, and raise wages for American workers. Our current code is uncompetitive, overly complex and loaded with special interest provisions that unfairly create winners and losers.”
If Secretary Mnuchin and the gang get this deal done, they’ll have the feel-good hit of the year on their hands.