(NOTE: This article covers a general guideline of the House and Senate bills, which are different and constantly being changed. This article covers the general language of what the final bill is expected to address, but may differ from current or future versions)
Republicans released a bill last week with significant changes to the US tax code. The bill, which has passed the Senate and House but is yet to be finalized, features about $1.5 trillion in cuts mostly going to businesses.
Many on the left have been quick to criticize, but the bill has substantial advantages both sides can look forward to.
Middle-class families can look forward to a bracket simplification from seven classes to a nice 3 tier system – 12, 25 and 35 percent – as well as a doubling of the standard deduction from $6,000 to $12,000. Individuals making between $9,275 and $37,500 per year can enjoy a percentage reduction from 15 percent to 12 percent. High-income individuals maintain a 39.6 percent.
Individuals will be able to spend less time, money, and effort on filing taxes each year, a positive for many families who can’t afford hiring tax professionals.
For businesses, the benefits are even greater – the corporate tax, for starters, is lowered from 35 percent to 20 percent. This one is significant, as 35 percent has been the highest corporate tax in the industrialized world for years. This will lead to more businesses creating jobs here in America, as well as the ability to sustain longer during rough times.
We would also switch to a “territorial” tax system, which would effectively nearly eliminate taxes paid on a company’s foreign earnings. This sounds bad on the surface – but it could actually help bring jobs and money to the U.S. as those companies wouldn’t receive any tax benefits or be able count those numbers for tax purposes.
Large corporations also spend billions each year hiring tax professionals to find every loophole possible. By eliminating most deductions and switching to the territorial system, many loopholes are closed, which would reduce the amount of cronyism and manipulation we see today.
The bill isn’t without demerit, though. The nearly-500 page bill that passed the Senate has numerous additional baked-in laws, many of which have nothing to do with the tax code. This presents a conundrum for Congressmen, and ultimately taxpayers. Not everyone would get a tax cut, most notably families that take multiple deductions. The bill also would cost about $1 trillion over the next ten years.
The cuts made are expected to bolster the economy and create new jobs, as well as make the tax code itself much less complicated. Regarding the bill, Congressman Justin Amash(R-MI) had this to say: “The tax cuts in H R 1 won’t directly benefit every taxpayer, and it’s likely some people will even see tax increases. This is not the bill I would have written, but the cuts in this bill are very broad, and the substantial reduction in the complexity of the tax code will benefit even those who do not see direct cuts to their income taxes.”
While it’s not perfect, most Americans will see tax cuts and will have an easier time filing taxes. The economy should be better off, creating to more jobs and more money staying in the U.S. It’s a great first step to economic prosperity.