If you care about economic growth and lifting wages for working people, something exciting is happening in the halls of Congress. This year, the Republican-controlled House and Senate set out to prevent the largest automatic tax increase in American history, which is set to occur at the end of the calendar year when major portions of the 2017 Tax Cuts and Jobs Act expire. But they are doing more than that, and at each step along the legislative process, what has become known as the “one big, beautiful bill” has gotten more pro-growth.   

To understand why, we have to go back to 2017. Then, Congress and President Donald Trump worked together to enact the most consequential pro-growth tax reform in over a generation. Back then, America had one of the highest business tax rates in the industrialized world. As a result, we were chasing employers out of America and to other countries. The 2017 reforms not only gave America a competitive business tax code, but they also encouraged more domestic investment — the type of investment that creates new businesses, grows existing ones, and, most importantly, lifts wages.   

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As the U.S. Chamber of Commerce has previously documented, before the tax cuts, the average hourly earnings for production and nonsupervisory workers were growing at a rate of 2.4% per year in 2016 and 2017. After the tax cuts, however, wage growth for these workers increased to 3.7% by October 2019. Thanks to these gains, by April 2020, the average production and nonsupervisory worker was earning about $1,400 more per year than the previous trend would have predicted. It is no exaggeration to say that the 2017 tax reforms were helping put the American dream within reach for millions of Americans. 

Fast forward to today, the House of Representatives has passed a bill that makes permanent the reduction in tax rates for the millions of small businesses that are taxed as pass-through entities. Without this change, the tax rate would have increased by more than a third, from 29.6% to 39.6%. 

The Senate has taken the House-passed bill and strengthened the policies that do the most to increase domestic investment, job creation, and wage growth. In particular, the Senate prioritizes the permanent reinstatement of three crucial tax policies:  

• The immediate deduction for domestic R&D expenditures 
• 100% bonus depreciation for new business investments 
• Expanded interest deductibility

These reforms are not only foundational to a competitive tax code, but they also provide the certainty and stability businesses and workers need to foster the type of major, long-term capital investments that fuel economic growth and opportunity for all Americans. 

It is hard for a business to make major plans to invest in America if it is worried that in a few short years, there will be a big tax increase on its research and development expenses or investments in expanding its operations. 

FED HOLDS INTEREST RATES STEADY DESPITE TRUMP PRESSURE

Voters understand this. That is why they have signaled that permanent, pro-growth tax reforms are important to them. According to a survey conducted by McLaughlin and Associates on behalf of the U.S. Chamber, a majority of voters support making tax relief permanent, and Americans are more likely to vote for a candidate who advocates permanent tax relief. 

As the legislative process advances toward a final House-Senate agreement, it is critical that the pro-growth provisions included by the Finance Committee are preserved. America’s economic future, and ability to remain a beacon of opportunity in an increasingly competitive world, requires a stable, predictable, and internationally competitive tax code that spurs growth and investment here in the United States.

Neil Bradley is Executive Vice President and Chief Policy Officer at the U.S. Chamber of Commerce.