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This week, the House and Senate will vote on comprehensive, pro-growth, pro-family tax reform. The legislation, known as the Tax Cuts and Jobs Act, will give families and individuals across the country tax reduction and simplification starting in 2018.
The legislation includes rate reduction and a doubling of the standard deduction. Under this change, the first $12,000 for an individual and $24,000 for a family will be tax-free. The standard deduction is already used by 105 million taxpayers across the country, who will see a significant tax reduction.
In addition, the plan doubles the child tax credit to $2,000, helping millions of American families across the country. According to the most recent IRS data, more than 22 million peopleused the child tax credit in 2015.
The bill also offers relief from the alternative minimum tax and the death tax by increasing the exemption amounts for both taxes. The AMT was initially passed to make sure 155 high-income Americans paid federal income tax. Today, it hits almost 4.5 million Americans, with millions more forced to calculate their taxes twice to comply with the tax.
Similarly, the death tax imposes unnecessary tax burdens on family-owned businesses across the country at a time when they are most vulnerable. Even those that do not pay the death tax must organize around it.
While simplification of the code is a key feature of the legislation, the bill also retains key tax preferences such as many retirement and education provisions.
The Left’s criticism of the GOP tax plan does not hold up to scrutiny
Despite the clear benefits of the plan, the Left continues to mislead the public by claiming that this legislation benefits “the rich” and large corporations over the middle class.
For instance, House Minority Leader Nancy Pelosi, D-Calif., literally called the bill “the end of the world,” while Senate Minority Leader Chuck Schumer, D-N.Y., called the bill a “betrayal of the middle class.” Unfortunately, this apocalyptic rhetoric has scared many Americans, with some polls showing more than half of Americans believe they will not see a tax reduction.
When reality replaces rhetoric, it is clear that the Democrat arguments have no basis in reality. Case in point — Senate Democrats claimed a family earning $86,000 per year would face a $794 tax increase, a charge that was swiftly debunked by the Washington Post’s Fact Checker, which gave it four Pinocchios (the worst rating possible). In reality, a family of four earning $86,000 a year would see a tax cut of almost $2,500, according to one estimate, tax reduction totaling nearly 50 percent.
Critics of the plan also say that limiting the state and local tax deduction and mortgage interest deduction will result in a tax hike for Americans. However, this is more than offset by the many other changes in the plan. Even so, these deductions are used by just 22 percent of taxpayers and are still partially retained in law. In contrast, 70 percenttake the standard deduction, and it is estimated that 95 percent of taxpayers would choose not to itemize.
While the bill is not perfect, it is indisputable that the Tax Cuts and Jobs Act reduces taxes at every income level with the biggest benefits being borne by the middle class.
The Republican tax reform bill begins to undo Obama’s legacy of higher taxes
Under Democrat control, Americans were hit with tax increases on the ability of families to deduct medical expenses, tax increases on medical devices and prescription medicines, and tax increases on health savings accounts. The Left even imposed taxes on employer-provided and individual health insurance, while imposing a tax for not purchasing health insurance.
The Tax Cuts and Jobs Act begins to reverse this by repealing this tax penalty, known as the individual mandate, granting additional tax relief to low- and middle-income families by eliminating one of the most regressive taxes in the code. In tax year 2015, 6,665,480 households paid this tax. About 79 percent of these households had annual incomes below $50,000, and 37 percent of households that paid this tax had annual incomes below $25,000.
Republicans promised to unrig the complex code and reduce taxes for the middle class. Through the Tax Cuts and Jobs Act, they are delivering. Under this legislation, families across the country will see strong tax relief and simplification just as President Trump and congressional leaders have promised.
Alexander Hendrie is a contributor to the Washington Examiner’s Beltway Confidential blog. He is tax policy director at Americans for Tax Reform.