In the wake of Congress’ passage of its historic tax reform bill, some will say it took one year for Republicans to pass a signature piece of legislation, but they’re wrong — it’s taken decades.
For as long as I can remember, Republicans have been promising to reform the broken tax code and replace it with a system that allows people to keep more of their hard-earned money. Over and over again, the GOP failed — until now.
Thanks to the leadership of the Trump administration, Speaker of the House Paul Ryan, and Senate Majority Leader Mitch McConnell, tax reform will soon provide important tax relief for tens of millions of families, create hundreds of thousands of jobs, dramatically expand the nation’s economic growth, keep corporations from leaving America for better tax climates, and potentially help bring back trillions of corporate dollars sitting overseas.
Liberal organizations and pundits and Democrats in Congress have repeatedly said the GOP tax bill is nothing more than a payoff for wealthy Americans and that it does virtually nothing to help lower- and middle-income taxpayers, but nothing could be further from the truth. Just as President Trump promised on the campaign trail and since entering the White House, this tax reform legislation is focused on two things: reducing the tax burden for those families who need it most and catalyzing our economy.
The GOP tax bill accomplishes these promises in a variety of ways. First, it reduces rates for most tax brackets (doesn’t increase any rates) and roughly doubles the standard deduction, which will now be $12,000 for individuals and $24,000 for couples. For a huge proportion of taxpayers, these two changes will create a fairer and simpler tax code.
Lower- and middle-income taxpayers have long paid far too much of their salaries to the federal government, which often squanders the cash by overpaying and over-hiring government bureaucrats, paying for expensive but pointless government works projects (think of former President Barack Obama's stimulus act), and mandating social programs that have failed to reduce poverty in any meaningful sense.
The GOP tax reform doesn’t just provide tax relief by cutting rates and doubling the standard deduction; it also significantly helps families by expanding the child tax credit.
Thanks to the efforts of Sen. Marco Rubio, R-Fla., the child tax credit will increase from $1,000 per child to $2,000 per child, and more of the tax credit will be refundable, which means lower-income working families will end up getting a greater amount of relief every April when they file their taxes. Further, eligibility for the child tax credit will be extended significantly. Under current law, the tax credit phases out beginning at $75,000 for individuals and $110,000 for couples. Under the GOP tax bill, the limits are $200,000 for individuals and $400,000 for couples, which means all middle-income families will now be able to take advantage of this tax provision.
To pay for lower rates and the expanded child tax credit, Republicans eliminated or reduced many tax loopholes and deductions. Opponents of tax reform have argued some of these reductions will harm lower- and middle-income taxpayers, but many of these claims aren’t based in reality (or, at the very least, the text of the final Republican bill). Contrary to popular belief, the vast majority of lower- and middle-income families won’t claim enough deductions under the tax bill to itemize their deductions (to take advantage of most tax deductions, you can’t claim the standard deduction), so few will be affected by cutting most deductions.
In an effort to damage the GOP tax bill, some liberals continue to perpetuate myths surrounding certain deductions in the tax reform legislation. For instance, it’s not true that people with high medical expenses will be unable to deduct these expenses from their taxable income, as they do now. In fact, the tax bill will allow people to deduct more of their medical expenses. Under current law, filers can deduct out-of-pocket expenses in excess of 10 percent of their adjusted gross income (AGI). Republicans’ tax reform legislation allows people to begin deducting their medical expenses when they reach 7.5 percent of AGI.
It’s also not true that the home mortgage interest deduction and state and local tax deduction will be eliminated or mitigated to the point that a significant number of low- and middle-income families will be harmed. The home mortgage interest deduction will be capped at $750,000 in mortgage (down from $1 million under current law), a measure that will impact very few middle-income filers and no low-income families. The SALT deduction will be reduced to a maximum of $10,000, but this, as with the home mortgage interest deduction, will only cause problems for a limited number of taxpayers—mostly upper-middle-income and high-income single filers in high-tax states.
It’s true that an ideal tax reform law wouldn’t raise taxes for a single person, but because Democrats were completely unwilling to agree to any reasonable tax reform measures, congressional Republicans were limited in what they could pass under the Senate’s budget reconciliation rules. However, even left-leaning think tanks admit the average taxpayer in every single bracket will receive a tax cut under the GOP tax bill, infusing the economy with more money and spurring economic growth.
Perhaps the most important part of the GOP tax bill is it creates large tax cuts for corporations and small businesses that will help everyone. The tax bill cuts the corporate tax rate from 35 percent to 21 percent. This will free up billions of dollars for U.S. corporations to spend on innovative new products and expansion, creating jobs and helping to continue the historic rise of the stock market, which in turn benefits virtually everyone with a retirement account and helps to make government workers’ pensions more stable.
The act cuts taxes applied to small business owners by granting filers a 20 percent deduction of pass-through income and dropping individual rates in every bracket, including the top marginal rate.
The Tax Foundation estimates the tax bill will create $600 billion in additional federal revenue, an additional 339,000 full-time jobs, and if renewed in the future, the act will increase long-term gross domestic product growth by 4.7 percent.
Since the Great Depression, Democrats have promised to make life better for Americans by stealing other people’s money and giving it to special-interest groups, bureaucrats, and government contractors. They pretend as though they are a sort of modern-day Robin Hood, but in reality, they don’t take from the rich government and give to the poor taxpayers, as the mythical Robin Hood did; they take money from those who work and give it to themselves and their Washington, D.C. pals. The tax bill begins to move our tax code back in the right direction. It isn’t perfect, but it will go a long way toward making America more competitive in the global marketplace.
President Trump and congressional Republicans deserve immense praise for passing major tax reform for the first time in a generation. It all but guarantees the tremendous economic growth we’ve witnessed since President Trump won the 2016 election will continue for years to come. Whether you’re low-income, a middle-class earner, or wealthy, this legislation will benefit you.
Justin Haskins (@JustinTHaskins) is a contributor to the Washington Examiner's Beltway Confidential blog. He is an executive editor at The Heartland Institute.
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