Call me a simple optimist, or a happy warrior. Despite the seemingly daily headlines about the collapse of modern western civilization under this presidential administration, I believe the American Experiment is alive and well. The recent tax bill passed by Congress is one reason why.
On Jan. 11, the IRS released revised tax tables for the 2018 year, reflecting the tax reform legislation passed and signed by the president. Beginning this month, the majority of taxpayers have seen additional money in their take home pay.
In light of months of punditry, prognostication, and in some cases deliberate misinformation about the details of the package, we will begin to see the positive impacts of this reform across a broad range of our economy. Allowing individuals and businesses to keep more of what they earn is good for the country and its citizens. Here are some of the specifics:
Individuals: Taxpayers will immediately benefit from the lowering of marginal rates at all income levels. While the number of brackets did not change, the rates within those brackets are lower. In addition, the standard deduction is doubled. This is important for two reasons – it provides more relief to those filing returns, and it shifts more taxpayers away from the tedious and costly process of having to itemize.
In addition, thanks to the tenacious efforts of Sen. Marco Rubio, parents will have a super-sized child tax credit – doubled from $1,000 to $2,000 (plus $500 for each non-child dependent). This is a huge win for American families struggling to make ends meet.
Corporations: The lifeblood of our economic engine is small business, and the tax package is already serving as a boost to corporate bottom lines. The final bill lowered the top corporate rate by 14 percentage points – from 35 to 21 percent – much more in line with the developed world. This will immediately provide an infusion of investment as companies will reinvest, reward their workforce, or revise their earnings projections upwards to shareholders. All three effects are beneficial to the economy.
Our friends at Americans for Tax Reform are keeping a running tally of companies that provide employee bonuses and other positive wage increases as a direct result of the tax reform. To date, 185 companies have gone public with plans for bonuses, wage increases, and other benefits – totaling more than one billion dollars already. And these are just those that have announced it. This ultimately validates the claim from conservatives – that a rising tide lifts all boats.
To be clear, the package represents compromises forged in Congress and this bill was not perfect. The number of brackets wasn’t reduced, and due to budget rules many of the provisions will sunset in 10 years, requiring reauthorization to be continued.
With that in mind, JMI appreciates the debate over keeping taxes low versus allowing Washington, D.C., to keep more of our money. Moreover, wealthier individuals in high-tax states will not be able to deduct as much of their state and local taxes. That's a net win for Florida and a wake-up call to leaders in California, Illinois, New York and Connecticut – it’s time to rethink your high-tax big-spending ways.
There is no perfect piece of legislation, because there is no perfect human being. And it is precisely because of that truth that JMI fights for limited government and economic freedom for every American. The tax reform package of 2017, already bearing fruit across our economy, is a tremendous step in the right direction.
Dr. Bob McClure is president and CEO of The James Madison Institute, a conservative, free-market think tank based in Tallahassee, devoted to research and education on public policy issues.