The release of the Tax Cuts and Jobs Act of 2017 this week constitutes a monumental step forward on the path to comprehensive tax reform. House Republicans have put forward a serious and thoughtful plan to fix many of the dangerous features of our broken tax code.
The response from Democrats, however, has been predictable: They were so anxious to dust off their tired class warfare manual that they didn’t bother to find facts to back it up. Luckily, the Washington Post fact-checkers took a much more serious interest in proofing their claims, digging a little deeper finding:
In their haste to condemn the GOP tax plan, Democrats have spread far and wide the false claim that families making less than $86,100 on average will face a hefty tax hike. Actually, it’s the opposite. Most families in that income range would get a tax cut.
The document Democrats had relied on estimated the effects of the unified framework, which was released in September. With details on where the income tax brackets will actually fall released in the bill today, we have an even clearer picture of how much tax relief American families and businesses can expect.
It is significant. Under this plan, the top rate of 39.6 percent remains, but four simpler, lower brackets exist underneath it: 35 percent, 25 percent, 12 percent, and zero percent. By also expanding the standard deduction, a majority of Americans will see their tax rates fall into those bottom two brackets.
The Democrats had to invent claims that lower-income earners would see a tax increase for good reason: The plan is detailed and aggressive in the relief it grants low- and middle-income earners.
There is one group of earners in particular who should be interested in the changes the plan proposes. Not only because they tend to be at the lower end of the income spectrum, but also because they have the most to gain from public policy that invests in our future: young people.
Last year was the first time Millennials and Gen-Xers overtook Baby Boomers as the largest part of the electorate. Within the next decade, Millennials are expected to be the largest voting bloc in the country. This generation has already begun building businesses and starting families. As a result, they've have been courted by brands who are eager to understand their vast potential as consumers. Public policy (as is usually the case) has moved much slower. The Tax Cuts and Jobs Bill of 2017 should be viewed as an entreaty to young people questioning how their evolving needs will be met in the future.
Data from 2016 show 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.”
The tax bill released on Thursday responds to this perspective in several ways. It makes it easier for entrepreneurs to invest in their businesses by implementing full expensing, which allows businesses to write-off the cost of purchases fully and immediately. This stands in contrast to current rules, which set arbitrary standards for business owners to deduct, over time, the cost of their capital investments.
By dropping and condensing the personal income tax rates, small businesses whose taxes are paid on their owner’s personal tax returns, will see a tax cut. The bill simplifies the rules for how small business income will be taxed and brings U.S. law in line with common practices, giving small business owners confidence and clarity.
The plan lowers the corporate tax rate from 35 percent to 20 percent and moves the U.S. corporate tax system to a territorial system, making U.S. companies internationally competitive. Taken together with efforts to streamline the tax code and induce investment, the corporate rate reduction will allow companies to invest in their business here at home. Workers will experience obvious benefits of such policies; the Council of Economic Advisers estimated that the rate reduction alone would result in a $4,000 wage increase for the average worker.
There are less obvious, but no less important, reasons young people should be interested in the House GOP plan. As my colleague Ryan Ellis points out at Forbes: The marriage penalty — that is, the flaw of the tax code that forces couples with combined incomes into a higher tax bracket than they otherwise would land as single filers — won’t hit couples until their taxable income totals $260,000, which is much higher than today.
It is perhaps conventional to hold young people, and Millennials in particular, in sardonically low regard — but they are the most salient demographic in business and, as of now, in politics. Companies have invested significant time and resources into understanding them as consumers; wise politicians should likewise be interested in understanding how public policy can unlock their potential and provide them the confidence to thrive.
With the tax plan released on Thursday, House Republicans may be starting to do just that.
Mattie Duppler Springer (@MDuppler) is a contributor to the Washington Examiner's Beltway Confidential blog. She is the senior fellow for fiscal policy at the National Taxpayers Union. She's also the president of Forward Strategies, a strategic consulting firm.
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