I have long advocated for a comprehensive tax reform, greater accountability in the Internal Revenue Service (IRS), and a fairer and simpler tax policy for Americans. The overcomplicated and outdated tax system riddled with loopholes and exemptions cost American families millions of dollars each year and was a confusing, burdensome system to navigate each April. It had been 31 years since the last major overhaul of America’s tax code. I am proud that Congress and President Trump were able to pass H.R. 1, the Tax Cuts and Jobs Act into law.
Overall, the changes to the old, broken tax code made in H.R. 1 will deliver much-needed tax relief to millions of families, help our workers and job creators compete and win here at home and around the world, and make the tax code simpler and fairer for all Americans. In Alaska, the typical middle-income family of four will see a tax cut of $2,803. The American economy has faced eight long years of deprecation, and this law created many growth-driven reforms that empower middle class families, support entrepreneurship and small business, and spur American competition and competitiveness. Below are some highlights of the law:
- Small Business Relief: Reduced small business taxable income by 20%. Small Businesses comprise 99% of the companies in Alaska, and this will allow small business owners to deduct more from their adjusted gross incomes. This puts money back into the hands of small business owners and provides them with some breathing room as they struggle to compete with larger corporations.
- Income Brackets: Lowered the seven income tax brackets to: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These tax brackets determine how much income tax individuals pay each year. Previously, the lowest bracket was 12%, and with the new plan, unmarried Americans only pay 10% on the first $9,525 they make annually. Married individuals filing joint returns only pay 10% on the first $19,050.
- Standard Deduction: Doubled the individual standard deduction to $12,000 for individuals and $24,000 for married couples. Standard deductions ensure that all taxpayers have at least some income that is not subject to the federal income tax. Individuals have the option of claiming the standard deduction, or itemizing their deductions. Doubling the standard deduction adds more incentives for people to claim the money rather than feeling the need to itemize numerous tax deductions which would likely sum up to an amount that is less than the new standard deduction level.
- Child Tax Credit: Doubled the Child Tax Credit to $2,000, raised the income threshold from $110,000 to $400,000, increased the refundable amount from $1,100 to $1,400, and added a non-refundable credit of $500 for dependents other than children. These crucial updates will help families care for their children and elderly dependents.
- Individual Mandate: Eliminated the Affordable Care Act’s individual mandate penalty tax, allowing families flexibility to buy the health care plan that is right for them, if they choose.
- Charitable Tax Deduction: Retained this itemized deduction. While there are some concerns that due to fewer people itemizing their charitable donations, there are not adequate incentives to spur people to donate, this legislation overall promotes a stronger economy. It grows Americans’ paychecks, allowing them to donate more of their hard-earned money to causes they believe in.