The Tax Cuts and Jobs Act
We have not had tax reform since 1986, and in the time since our tax code has been sliced up and carved out with special preferences and loopholes. We have fallen behind the rest of the world as they have moved to enhance their competitiveness. The loopholes that have sprouted benefit a narrow class. The tax code is broken. It’s worth refreshing on how long it has been and why tax reform is so badly needed. The last time we saw real tax reform:
The Chicago Bears were the defending Super Bowl Champions
The Berlin Wall still stood
Cell phones were “bricks”
The internet had yet to debut commercially
There have been a lot of misconceptions about this plan. The Tax Policy Center had to retract its analysis that this plan would raise taxes on 1 out of every 8 taxpayers, and in issuing its updated analysis found that “the legislation would reduce taxes on average for all income groups in 2018 and 2027.” A number of Senators earned “Four Pinocchios” for falsely claiming that families earning $86,000 would we an average tax increase of $794.
Below are some highlights of the Tax Cuts and Jobs Act so you can learn directly what is in this plan. At the very bottom, you can find a link to a more comprehensive “What You Need To Know” document produced by the Committee on Ways and Means. Among the highlights, you’ll find information on:
INDIVIDUALS AND FAMILIES
JOB GROWTH INITIATIVES
49% of taxpayers in the Sixth District currently take the standard deduction, so under this new plan, a majority of the district will find the doubled standard deduction a more attractive and simpler way to file their taxes.
There is no change to the mortgage interest deduction for any mortgage currently in existence.
For home purchases executed after implementation of this plan, you can still deduct the portion of those interest payments attributable to the first $500,000 of your home’s mortgage value. Assuming a homebuyer were to put down 20%, that would mean homes valued under $625,000 would see no change moving forward under this plan.
The median home value in the Sixth District is $316,000.
48% of taxpayers in the Sixth District take advantage of this deduction currently.
The average amount claimed in our district is $8,914, meaning most will see no impact from this change.
In fact, the average deduction stays below $10,000 all the way up to the $200,000-$500,000 income bracket.
30,074 taxpayers in the Sixth District are subjected to the AMT, which prevents them from taking advantage of their itemized deductions. The AMT is repealed under this plan.
44,219 taxpayers in the Sixth District claim the Child Tax Credit.
In addition to increasing the amount of the credit, more families will have access to it as the income level at which the credit phases out is more than doubled.
Eliminates the Affordable Care Act's individual mandate penalty tax - providing families with much-needed relief and flexibility to buy the healthcare that's right for them if they choose.
Provides support for those who have attended college by continuing the student loan interest deduction.
Provides support for graduate students by contiuing to exempt the value of reduced tuition taxes.
JOB GROWTH INITIATIVES
The Tax Cuts and Jobs Act has been endorsed by job creators including the National Federation of Independent Business, the National Association of Manufacturers, the Associated Builders and Contractors, the Association of Equipment Manufacturers, and the National Retail Federation.
Reduces the tax rate on the hard-earned business income of Main Street job creators to no more than 29.6% – the lowest tax rate on small business income since World War II.
- 53,521 taxpayers in the Sixth District have small business income.
Provides a new, low tax rate of 9% for new businesses earning less than $75,000 in income to help the Main Street startups that fuel innovation and job creation in communities across the country
Lowers the corporate tax rate to 21% – down from 35%, which today is the highest in the industrialized world – the largest reduction in the U.S. corporate tax rate in our nation’s history.
- This will bring jobs back to the United States and raise wages for hard working Americans.
- Both the Congressional Budget Office and the Joint Committee on Taxation estimate that 25% of the corporate tax burden is passed onto workers in the form of lower wages: https://www.jct.gov/publications.html?func=startdown&id=4528
Allows businesses to immediately write off the full cost of new equipment to improve operations and enhance the skills of their workers – unleashing the growth of jobs, productivity, and paychecks.
Protects the ability of small businesses to write off the interest on loans that help these Main Street entrepreneurs start or expand a business, hire workers, and increase paychecks.
Retains the low-income housing tax credit that encourages businesses to invest in affordable housing so families, individuals, and seniors can find a safe and comfortable place to call home.
Preserves the Research & Development Tax Credit that encourages our businesses and workers to develop cutting-edge "Made in America" products and services.
Retains the tax-preferred status of private-activity bonds that are used to finance valuable infrastructure projects.
Eliminates the Corporate Alternative Minimum Tax, thereby lowering taxes and eliminating confusion and uncertainty so American job creators can focus on growing their business and hiring more workers, rather than burdensome paperwork.
Modernizes our international tax system for American employers to bring home foreign earnings to invest in growing jobs and paychecks in our local communities.
- Companies are holding more than $2 trillion overseas that should be unlocked to come back to be invested here at home.
Makes it easier for American businesses to bring home foreign earnings to invest in growing jobs and paychecks in our local communities.
Prevents American jobs, headquarters, and research from moving overseas by eliminating incentives that now reward companies for shifting jobs, profits, and manufacturing plants abroad.
For a more in depth look at the Tax Cuts and Jobs Act, please take a look at this What You Need to Know document from the Committee on Ways and Means: