Tax day reflections on tax reform benefits
This tax filing season is a reminder of the benefits of the 2017 tax reform law already being realized and the long-term positive effects taking shape. These gains include an average 3.1 percent growth in our economy, the creation of more than 2.6 million jobs and a 3.4 percent increase in wages in the last year alone. The considerable progress being made is worth consideration as Americans file taxes this year.
Fortunately, there is now a growing understanding that tax refunds are not a good measure of the success of tax reform, as larger tax refunds mean the taxpayer has been giving the government a significant portion of earnings as an interest-free loan for a year.
At the beginning of 2018, the Internal Revenue Service (IRS) adjusted withholding tables to better align individual tax withholdings with tax obligations under the reformed tax law. Smaller refunds are likely the result of individuals receiving part of their tax relief in their 2018 paychecks.
Lower tax rates are directly reducing tax bills for millions of families across our nation. Americans for Tax Reform (ATR) reported 90 percent of taxpayers with annual income of between $40,000 and $64,000 saw an average federal tax cut of $810, based on estimates from the Institute for Taxation and Economic Policy.
The child tax credit was doubled, which results in $1,000 less in taxes families pay for each child. While tax reform succeeded in streamlining the tax code, many important provisions, like the Adoption Tax Credit, deduction for charitable contributions and home mortgage interest deductions were maintained.
The evolving nature of corporate ownership, as more and more shares are owned not by individual investors but by pension funds and other retirement vehicles, provides that tax reform’s reductions in business taxes will also serve to broadly benefit workers and families.
Utility bill reductions and other benefits have assisted Americans across our nation. ATR maintains a list of examples of new hires, benefit increases, facility expansions and utility rate reductions resulting from the Tax Cuts and Jobs Act. ATR’s Idaho specific examples include adjustments at various businesses throughout the state and utility rate reductions through Avista, Idaho Power, Intermountain Gas, Rocky Mountain Power and Suez Water Idaho Inc.
Reduced complexity is being realized through changes, such as the near doubling of the standard deduction. This saves families from having to save or find receipts to calculate complicated deductions. The Alternative Minimum Tax, which added needless complexity and was becoming a greater and unintended burden for the middle class, was also eliminated for all but the highest earners.
Economic growth has been aided by enactment of the Tax Cuts and Jobs Act. In addition to gross domestic product (GDP) growth, business investment has grown an average 7.2 percent. Our nation has experienced average monthly job gains of 215,000 while the average unemployment rate has decreased to 3.9 percent.
According to a recent report from the Congressional Budget Office (CBO) that compared its January 2017 forecast against its recent January 2019 forecast, the cumulative increase in projected GDP in our economy over the 2017-2027 period is $7.17 trillion. Of that, CBO notes the 2017 tax reform law accounts for a more than $2.3 trillion increase in our projected economic growth over the next decade.
The positive effects of comprehensive tax reform are reflected in many ways since enactment of these needed changes, and they are just beginning. These are just some of the positive effects already taking shape as the benefits continue to be recognized by American families in varying ways at different times moving forward.
Mike Crapo, R-Idaho Falls, is a U.S. senator for Idaho.