A Working Tax System
November 21, 2017
When President Ronald Reagan implemented a sweeping reform of our nation’s tax system in 1986, it helped millions of Americans from different walks of life save money and kicked off an era of strong economic growth. A little more than three decades later, our tax code has become severely outdated. For the last several weeks, the House has been working through the legislative process to craft a bill aimed at fixing the current tax code and creating one that will support the individual, families and American businesses – something that is long overdue. Last week, the House was able to accomplish the first step in major tax reform through the passage of the Tax Cuts and Jobs Act (H.R. 1), which will give Americans the opportunity to keep more of their hard-earned pay.
The Tax Cuts and Jobs Act is a new system that simplifies the current tax code and promotes substantial economic growth through corporate tax reform. It promotes individual prosperity and American ingenuity. To start, the individual will see a serious tax break. Before, individual filing was divided into seven brackets. Under the reformed system, it consolidates the number of brackets into four – 12%, 25%, 35% and 39.6% - which helps a variety income levels. In addition to doubling the standard deduction and additional tax credits, with lowered tax rates, it is a system that will give Americans more opportunities to prepare for life events like retirement and home ownership.
For example, a family of four with a combined income of $59,000 could see over $1,182 back in tax returns after rate reductions under the new system. Combined with the doubled standard deduction and enhanced Family and Child tax credits, the family’s tax bill could be only $400 at the end of the year. Likewise, if that same family had a household income of $300,000, it could see a tax cut of $6,080, which could reduce its current tax bill from $64,680 to $58,600 a year.
This is not only a system that helps increase income for families across America. This is a jobs creation bill. Many American companies have taken their business and manufacturing divisions overseas because of the heavy corporate tax rate in the U.S., and often opt for lower rates in other nations. In fact, the United States currently has the highest corporate tax rate in the industrialized world at 35%. The Tax Cuts and Jobs Act will reduce the corporate tax rate to 20%, which will make the United States more competitive on the global stage and incentivizes corporations to invest, innovate and grow.
While the new system supports major American corporations, it also restructures and lowers the tax rate for small businesses. It incentivizes startup businesses with a low 9% tax rate and caps the income tax rates on small business at 25%. This will bring business back to America, unleash thousands of job opportunities and promote economic growth in our nation.
An effective tax code shouldn’t take away large portions of your paycheck each year, and it shouldn’t drive businesses away from our own shores. It should be fair to the American that is starting his first job or to the family that is looking to buy a new home. It should allow businesses to flourish and give them the benefit to expand and hire without taxing burdens. And most of all, it shouldn’t be complicated. The Tax Cuts and Jobs Act accomplishes these objectives and more. I look forward to the action the Senate will take on tax reform and to seeing major tax legislation become law before the end of the year.