The Tax Cuts and Jobs Act is a Major Victory for the American People
On February 1st, many Americans woke up to larger paychecks thanks to The Tax Cuts and Jobs Act that passed in December. The bill reforms the tax code’s rates and brackets, cutting over $5.5 trillion in taxes over the next ten years. Employers have until February 15th to implement the new withholding rates.
Aa a result, 90% of Americans can expect to receive more take-home pay this year. The increase in net income is already making a real difference for workers and their families, allowing them to invest in their financial futures, give back to local communities, upgrade household appliances, recover from holiday debt, and afford child care:
For me close to $200 a month which more gets invested in my 401K and more of a write off at the end of year #Taxcuts #Notcrumbs + spending $ I was able to donate books in honor of #BlackHistoryMonth thank you to @realDonaldTrump— Ljdr925 (@ljdr925) February 4, 2018
$1980.00 more in my pocket this year!! Pays for Christmas!!!! Thank you #Notcrumbs— Lois (@loisami54aol) February 2, 2018
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To date, more than 300 companies have also announced bonuses, raises, and increased pay for more than 3.5 million American workers across the country.
House Minority Leader Nancy Pelosi and former Democratic National Committee chairperson Debbie Wasserman Schultz have dismissed this widespread financial relief, saying it doesn’t amount to much for American families. But for the average American, particularly those living paycheck to paycheck, these unexpected bonuses and raises are not crumbs. However, as my colleague Patrice Onwuka points out, it’s not surprising that that Pelosi and Schultz don’t understand that this extra money can go a long way for most individuals and families:
"To Nancy Pelosi, whose net worth is around $30 million, and Wasserman Schultz who earns $174,000 a year, $1,000 probably doesn’t look like much.”
"However, to cash-strapped workers and families with tight budgets, that one-time bonus can deliver unexpected financial relief. The Federal Reserve found that nearly half of all Americans could not come up with $400 in an emergency. This bonus makes for a great start to an emergency fund, replace a broken appliance, pay for groceries, or be a down-payment on a vehicle.”
Critics of the new tax bill have also argued that these success stories shouldn’t be celebrated because the changes are not permanent. Under the Tax Cuts and Jobs Act, the tax rates for individuals expire in 2025 while the corporate tax cuts will remain permanent.
But there are good reasons why the individual tax cuts are temporary and why the corporate tax rates are not:
- In order to avoid a Democratic filibuster, Senate Republicans were forced to pass the bill through the reconciliation process since it only requires 51 votes. Under reconciliation, the bill cannot add to the deficit outside of the budget's 10-year window. With bipartisan support, tax reform could have gone through regular order and all of the bill’s tax cuts could have been made permanent.
- Temporarily cutting the corporate income tax wouldn’t incentivize employers to invest in their workforces or hire new workers. Republicans made a strategic decision to make the corporate cut permanent to give businesses and investors the long-term security necessary to boost economic growth.
- Republicans knew individual cuts would become popular with voters and would therefore be more likely to be extended by a future Congress.
This certainly doesn’t negate the results we’ve seen since the tax bill was passed. These reforms have allowed American workers and their families to keep more of their hard-earned dollars. They’ve also spurred more jobs and higher wages for American businesses, strengthened our economy and broadened opportunities for workers. It would be surprising if lawmakers didn’t pass a bill to extend the individual tax rates before 2025.
The Tax Cuts and Jobs Act is not the perfect bill, but perfect shouldn’t be the enemy of the good. The final result is a pro-growth bill, and most importantly, a major victory for the American people.