Joint Delegation Column: Goodbye To Old Federal Tax System
Guest column submitted by the Idaho Congressional Delegation: Senator Mike Crapo, Senator Jim Risch, Congressman Mike Simpson and Congressman Raúl Labrador
This is the last week where taxes will be paid under the more complicated old federal tax system that takes more of your hard-earned income. When you file next year, rate reductions will be among the more clearly felt benefits of tax reform. The positive outcomes of the Tax Cuts and Jobs Act are continuing to take shape, but the advantages—including bonuses and wage increases; business investment, productivity and job growth; boosts to retirement assets and other investments; and time and resources savings through filing simplification—are making a difference in our economy.
Increased Retirement and Education Investments—Americans are gaining an increase in their retirement assets and 529 education savings accounts for their children as a result of the rise in stock prices and corporate stock buybacks, even before the benefits of lower tax rates for individuals take effect. An increasing portion of corporate ownership is being held by pensions and defined contribution retirement plans. The Investment Company Institute reports that the majority of U.S. households with defined contribution retirement plan accounts had moderate incomes and some had incomes of less than $25,000 per year. This means that the millions of middle-class Americans with a 401 (k) plan or other related savings, including 529 plans for their children, benefit significantly from increased stock equity from boosts to the stock market and stock buybacks.
Lower Taxes—Idahoans in every income group are receiving reductions in their tax burdens, with the largest percentage reductions benefiting those in lower and middle-income tax categories, according to the Joint Committee on Taxation. The Tax Cuts and Jobs Act lowers individual tax rates; increases the Standard Deduction; expands the Child Tax Credit; preserves the Adoption Tax Credit, the deduction for charitable contributions, the home mortgage interest deduction; eliminates the Obamacare individual mandate penalty beginning January 1, 2019; provides immediate family farm and family business relief from the Death Tax by doubling the exemption amount; and more.
Simplification—Calling the compliance burdens in the tax code “overwhelming,” the Taxpayer Advocate Service (TAS) reported, in a 2016 report, that taxpayers and businesses spent about six billion hours a year complying with tax-filing requirements. The tax reform law’s simplification and compliance cost reductions will ease tax filings. By doubling the standard deduction, many middle income families will see the benefit of no longer having to save all of their receipts throughout the year and then produce them again at tax time next year.
Wage Boosts and Bonuses—Companies based or operating in Idaho and nationwide have been announcing bonuses and wage increases.
Increased Investment, Jobs and Competitiveness—Freeing up capital needed to expand American businesses and American jobs is also a long-term benefit of tax reform. The tax reform law lowered the corporate tax rate so that American businesses are no longer taxed at the highest rate in the industrialized world. A more competitive tax code better enables capital formation resulting in new companies being formed, staying here and expanding job opportunities.
As this year’s tax filing draws to a close, we are saying goodbye to our old federal tax system and welcoming lower taxes for Idahoans, simplification, economic boosts and other significant benefits brought through tax reform. We look forward to building off the benefits of tax reform for the betterment of Idaho and America.
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