President Trump and Republicans in Congress are on the cusp of a historic victory to reform the broken federal tax code. The Tax Cuts and Jobs Act will provide meaningful relief for middle-class families and businesses across the country. The result will be a fairer, flatter, and simpler tax code that will lead to stronger economic growth, more jobs, and higher wages.
Congress spent this week in a conference committee to iron out minor differences between the two versions of the bill. While this is an opportunity to make the bill even better, members should quickly resolve their differences and ensure tax reform is signed into law before the end of the year.
Lawmakers can either support this plan, or they can support the status quo – an absurdly complex tax code that restricts economic growth and harms American families across the country.
The current code is so complex that it is difficult, if not impossible, for the typical family to file its tax return. While just 26,000 pages in 1986, today the tax code is almost three times that size. Families and businesses are currently forced to spend more than 8.9 billion hours and $400 billion complying with the code every year, according to an analysis by the Tax Foundation. More than 80 million individuals and families rely on a paid preparer to file their taxes, according to IRS data.
Individuals would also benefit from doubling the standard deduction from $6,000 to $12,000, and double those amounts for a family. Combined, these changes, together with the repeal or consolidation of many credits and deductions, will allow Americans to keep more of their hard-earned income with the majority of taxpayers filing on a postcard.
The plan reduces marginal income tax rates for Americans at every income level, and may consolidate brackets. The House version consolidates the existing seven brackets into four. Senate version reduces almost every bracket – with the 25 percent bracket going down to 22 percent and the top bracket going down from 39.6 percent to 38.5 percent.
Businesses of every size will see significant tax relief, too. Corporations will see the top federal income tax rate fall from 35 percent to 20 percent, as well as improvements to the international tax system through the creation of a modern, territorial system of taxation that ends the competitive disadvantage faced by U.S. businesses.
Meanwhile, small businesses — America’s engine of job creation — would see lower rates and reduced burdens. These changes will make our tax code more competitive globally and give businesses the certainty they need to plan, invest, and create new jobs here in the U.S.
Progress toward this goal didn’t happen overnight — Republican leaders in Washington have made swift, coordinated progress on tax reform using regular order over the past several months.
To recap: The so-called "Big 6" — Treasury Secretary Steve Mnuchin, National Economic Council Director Gary Cohn, House Speaker Paul Ryan, R-Wis., Senate Majority Leader Mitch McConnell, R-Ky., Ways and Means Chairman Kevin Brady, R-Texas, and Finance Chairman Orrin Hatch, R-Utah — kicked off the process by releasing the unified framework, an important starting point that showed consensus among conservatives.
Both chambers of Congress produced budget resolutions providing a framework for tax reform through regular order, reporting it out of their respective budget committees and then passing them on the floor. The House Ways and Means Committee and the Senate Finance Committee then wasted no time translating the unified framework into legislative text, and marking up and passing bills. The House of Representatives passed H.R. 1, the Tax Cuts and Jobs Act, before leaving for Thanksgiving break with a 227-205 vote. The Senate passed its version with a 51-49 vote last week.
For everyday Americans, the past eight years of progressive policies resulted in stagnant economic growth and wages, and too few jobs. President Trump rode this wave of unrest to the White House with a mandate to unrig Washington and make it work better for ordinary Americans. After years of talking about it, Congress has the opportunity to give the best end-of-the-year Christmas gift of all – tax relief for families of every income level and for businesses large and small.
Christine Harbin (@ChrissyHarbin) is a contributor to the Washington Examiner's Beltway Confidential blog. She is vice president of external affairs for Americans for Prosperity. Alexander Hendrie is a contributor to the Washington Examiner's Beltway Confidential blog. He is tax policy director at Americans for Tax Reform.
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