The Tax Cuts and Jobs Act has been introduced in the House, by the Ways and Means Committee, with the aim of boosting economic growth and employment. The cornerstone of the bill is a massive tax cut to the middle class, and lower class, the first in 31 years.
Ways and Means Chairman, Kevin Brady spoke to reporters on Capitol Hill this Thursday, and explained how a middle-income family of four who earns $59,000 can expect to see a massive tax cut of $1,182 under the new proposal. “After 31 years, today marks the beginning of the end of America’s broken tax code,” Brady had said. “I feel like we just played the world series of tax reform and the American people won.”
The proposal has five major goals, including to provide relief for middle-class families, streamlining and simplifying the tax codes so that Americans can file on a postcard, cutting the taxes for businesses, creating more jobs and increasing the wages for American workers, and encouraging the businesses to bring back trillions of dollars from overseas investments.
On the individual side, the bill would further reduce the number of tax brackets to five and also lowers rates to zero, 12 percent, 25 percent, 35 percent, and 39.6 percent for the top earners. The bill doubles the standard deduction for families from $6,350 to $12,000 for individuals and $12,700 to $24,000 for the married couples. The measure also eliminates the special-interest deductions so Americans can have the simplicity of filing their taxes on a postcard.
Brady said he wanted to insure that these tax reforms are family friendly and the legislation includes a new family credit, which increases the Child Tax Credit from $1,000 to $1,600. The chairman had said that for the first time it would help parents as well, giving them a $300 credit for each parent and $300 credit for a non-child dependent to help with everyday expenses.
The bill also preserves the Earned Income Tax Credit to give relief to low-income Americans. It also streamlines education savings so families can have more than a dozen ways to save for college tuition.
The legislation also promotes the charitable giving and allows deductions for charitable contributions and preserves the home-mortgage interest deduction.
Brady said that the tax reform bill would repeal both the Alternative Minimum Tax and the death tax.
“The Alternative Minimum Tax is that second tax deduction,” Brady said. “Next year, if we did not repeal it millions of Americans would have to file for a bigger tax the second time and on average they would pay $7,500 more. Most of those families are in high tax states. We provide immediate relief to family-owned farms and businesses that are damaged by the death tax. In year seven there will be full and permanent repeal of the estate tax. Eliminating the death tax not only eliminates double and triple taxation, it creates about 140,000 new jobs as well.”
On the corporate side, the plan reduces the corporate tax rates down to 20 percent from 35 percent, which is the largest corporate tax cut in American history. Businesses are also allowed to immediately expense new equipment as a result of this new plan, which can help the skills of workers and boost jobs, paychecks, and productivity.