Sens. Susan Collins and Angus King have a rare opportunity to reform the broken tax code this week when the U.S. Senate votes on the Tax Cuts and Jobs Act.
The pro-growth, pro-family Tax Cuts and Jobs Act is a huge win for families and individuals in Maine and across the country.
Under this legislation, Americans at every income level see tax reduction and drastic simplification of the 70,000-plus-page tax code. This plan also reduces taxes for small businesses and corporations to promote more investment in the economy, leading to higher wages and new or better jobs.
DOUBLES STANDARD DEDUCTION
The Senate plan reduces almost every tax bracket and doubles the standard deduction from $6,000 to $12,000 ($12,000 to $24,000 for a family). This reform means direct tax relief for the 466,000 Maine individuals and families that currently take the standard deduction.
The Tax Cuts and Jobs Act also doubles the child tax credit to $2,000 per child, giving the 87,670 families in Maine that take the credit more take-home pay. The plan also repeals the Alternative Minimum Tax, directly reducing taxes for 14,530 taxpayers in Maine and simplifying the code for thousands more who no longer need to calculate their income under the AMT.
Through these reforms, a family of four with an annual income of $73,000 will see a tax cut of nearly $2,200 – a reduction of nearly 60 percent. Similarly, an analysis by the nonpartisan Tax Foundation found that the Tax Cuts and Jobs Act will create almost 4,000 new full-time jobs in Maine and increase after tax-income for a typical middle-class family by $2,238.
PRO-GROWTH REFORMS
The plan also implements numerous pro-growth reforms so that businesses large and small are granted much-needed relief.
The U.S. currently has the highest corporate tax rate in the developed world. The Senate plan lowers the rate to 20 percent. This rate reduction is long overdue – the U.S. corporate rate has barely changed in 30 years, and America is just one of three developed countries that has failed to reduce their corporate rate since 2000.
Similarly, pass-through entities that pay taxes through the individual code (such as sole proprietorships, limited liability companies and S Corporations) see relief with lower tax brackets across the board and a 17.4 percent exclusion on business income.
The Senate bill also encourages businesses to invest in the economy through the implementation of full business expensing for five years. In addition, U.S. companies operating overseas will again be able to compete against foreign competitors through the implementation of a modern, territorial system of taxation that ends the needless and complex system of double taxation present in our outdated worldwide system of taxation.
SUBJECT TO HARSH CRITICISM
Despite the clear benefits the Senate’s Tax Cuts and Jobs Act will have for Maine businesses and families, the plan has been subject to harsh criticism.
Soon after the bill was released, Senate Democrats claimed it would leave a family earning $86,000 per year facing a $794 tax increase. However, this claim was debunked by the Washington Post’s Fact Checker, which gave it four Pinocchios (the worst rank possible).
Similarly, the Joint Committee on Taxation’s analysis of the Tax Cuts and Jobs Act claims that the repeal of the Obamacare individual mandate will cause taxpayers earning between $10,000 and $30,000 to face a tax increase starting in 2021. Under this assumption, millions choose not to purchase Obamacare, meaning they will also choose not to receive the Obamacare refundable tax credit.
The committee’s analysis assumes that individuals will choose to increase their own taxes – the Senate bill retains the Obamacare tax credit and does not limit anyone’s eligibility for insurance. A separate and more accurate Taxation Committee analysis of the bill finds tax reduction at every income level (including for those earning between $10,000 and $30,000), with the biggest winners being middle-class families.
These misleading claims aside, the Senate’s Tax Cuts and Jobs Act is a pro-growth, pro-family bill that reduces taxes for individuals and businesses, simplifies the code and grows the economy. Sen. Collins and Sen. King have a rare opportunity to give much needed tax relief to Mainers. They should support this pro-growth, pro-family legislation.
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