Millennials recently overtook Baby Boomers as America’s largest living generation. They are the largest share of the American workforce. Their median wages, after adjusting for inflation, have at best been stagnant, and at worst fallen, since the Great Recession. And according to a recent Pew Research analysis, they represent the largest group of households living in poverty.
More than any other demographic group Millennials are in desperate need for a fundamental economic shift that can put them back on track toward achieving the American Dream. We need faster economic growth, higher wages, and more job opportunities – all things that tax reform has the opportunity to provide.
So why aren’t we talking more about how Millennials will be impacted by Republicans’ tax reform bill? After all, it contains numerous provisions that stand to benefit young workers and consumers.
For instance, the Republican plan to reduce the corporate tax rate to 20 percent will increase after-tax income by an average of over $1,800, according to an analysis by the non-partisan Tax Foundation. The same study found that tax reform will create more than 592,000 new jobs, a rising tide that will not just benefit job-hunting Millennials, but will jumpstart an otherwise stagnant economy.
The bill will also help the two-thirds of millennials who have thought about starting their own business, and the larger majority who believe that the current tax code is unfriendly to small business. As Justin Dent writes for The Hill:
Proposed tax reform will help millennials make their entrepreneurial dreams a reality by significantly reducing and simplifying the small business tax burden. The House tax plan will reduce the small business tax rate to just 9 percent on the first $75,000 of taxable income, a 40-percent cut from the current 15-percent rate.
To ensure that this provision helps small business startups most in need, it will only be available for businesses earning a maximum of $150,000 annually. This will directly benefit millennial entrepreneurs trying to get their “Shark Tank” products off the ground. For successful small businesses, the House bill will reduce the top marginal small business tax rate to 25 percent.
Instead of a separate rate structure, the Senate tax bill would create a 17.4-percent small business tax deduction, allowing millennial small businesses to keep some of their earnings tax-free to catch up to their competitors run by older generations.
The bill would also help millennials by taking dramatic steps to simplify the tax code. According to a survey last year, 80 percent of taxpayers aged 18-34 who filed taxes said they’re fearful about some aspect of preparing their taxes, the highest of any age group.
“In some ways, it makes sense — Millennials tend to have less experience with a deeply confusing tax code, less cash to seek professional help and less need for the more complicated returns that having children or a mortgage can bring,” Liz Weston, NerdWallet columnist and personal finance expert, told USA Today.
By eliminating most itemization and increasing the standard deduction, the Republican plan will dramatically simplify Millennials’ tax returns. This leads to high compliance cost that not only burden less experienced tax filers, and perhaps more importantly, lead to an unlevel playing field between millennial entrepreneurs and more mature companies, who can afford well-paid accountants and lawyers.
These, and several other changes in Republicans’ tax reform plans, would be a a boon to young workers and families, many of whom have been left behind in today’s economy. We’ve been conditioned over the past eight years to accept that we’re in a new economic normal and that the American Dream no longer applies to us. These reform plans suggest the possibility of a different future, one that fosters economic growth, higher wages, and entrepreneurialism. On behalf of our generation, we encourage Republicans to continue working to get this game-changing legislation over the finish line.