House Republicans have unveiled their long-anticipated tax reform and reduction bill, and it was worth the wait.
The bill is stuffed with commonsense changes designed to lower income tax rates by sweeping out economy-distorting deductions, credits and loopholes that has slowly eroded the tax code over the last decades. Overall, the 429-page bill, dubbed the Tax Cuts and Jobs Act, would dramatically simplify the tax code, cut rates for all Americans, and reshape the corporate tax system to make it more globally competitive.
“This is an historic day,” Speaker Paul Ryan said upon unveiling the legislation. “For too long, hardworking Americans have suffered under a tax code that is too unfair, too complicated and too expensive. That ends this year. Under our plan, typical middle-class families will see bigger paychecks and receive a $1,182 tax cut. That means greater take-home pay and more money in your pocket.”
It achieves those aims through some significant reforms, including:
- Collapsing todays seven tax brackets for individuals down to four, with rates of 12, 25, 35 and 39.6 percent. With the exception of the highest income Americans, whose rate will stay the same, that’s a rate reduction for everyone.
- Roughly doubling the standard deduction from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples. That means significant tax cuts for most middle- and working-class families.
- Abolishing the death tax to stop family-owned farms and businesses from worrying about passing on their businesses to future family generations.
- Establishing a new Family Credit, which expands the Child Tax Credit and preserves the child and dependent care credit
- Cutting corporate tax rate from 35 percent—the highest in the industrialized world—to 20 percent, allowing our businesses to compete on the world stage. The plan would also allow businesses to expense investments in the first year in order to incentivize capital investments to expand productivity.
- Modernizes the international tax system to make sure businesses are not double taxed if they bring their foreign earnings back onto our shores.
Of course, presenting a solid plan is just the beginning of the bill’s difficult journey. After all, there is a reason that fundamental tax reform on this scale hasn’t been passed since 1986, and it’s not been for lack of trying.
“The special interests will distort the facts, the lobbyists will try to save their special deals, and some in the media will unfairly report on our efforts,” Trump said. “But my Administration will work tirelessly to make good on our promise to the working people who built our Nation and deliver historic tax cuts and reforms — the rocket fuel our economy needs to soar higher than ever before.”
And although the policy debate will inevitably focus on the wonkier details of the legislation, that thesis cannot be lost: This is a job creation bill. As Grover Norquist writes for Fox News:
After eight years of the slowest “recovery” in modern American history, we are now poised to create millions of jobs and move from our Obama-era 2 percent economic growth rate to our historic average of 3 percent growth and beyond. President Reagan’s growth rates were over 4 percent. We will match and likely surpass that.
Rep. Kevin Brady, R-Texas, who is chairman of the tax-writing House Ways and Means Committee, focused on designing tax reform that put economic growth first and foremost.
Every decision was focused on “what creates the most jobs and income increases for Americans” and “how do we make this permanent,” so we do not have a repeat of the 2012 disappearing tax cuts, when the Bush-era tax cuts expired.
Inevitably, the same Democratic legislators who have railed against the status quo, argued vehemently for tax reform and promised jobs for their working-class constituents, will come out against this legislation. But Republicans will not be pushed off course. They know that America cannot grow comfortable that the status quo is the “new normal,” as President Obama suggested.
Instead, as Speaker Ryan forcefully said, “We’re going to get this done. You know why? Because the American people are counting on us.”