This week, the House will vote on the Protecting Family and Small Business Tax Cuts Act (H.R. 6760). This bill is part of Tax Reform 2.0 - a set of three bills that would make permanent most of the tax cuts from the Tax Cuts and Jobs Act (TCJA), simplify and expand family savings, and encourage small business creation. As of now, the TCJA’s tax cuts for individuals are set to expire in 2025, but H.R. 6760 would make permanent many key temporary provisions of the law.
According to Adam Michel, Policy Analyst at the Hermann Center for the Federal Budget at The Heritage Foundation, these provisions include:
Permanently lower individual income tax rates and thresholds.
Permanently larger standard deductions of $12,000 for single filers and $24,000 for married couples filing jointly.
Permanently doubled child tax credit to $2,000 per child and higher phase-out threshold. Permanent repeal of personal and dependent exemptions and permanent $500 non-child dependent credit.
Permanent $10,000 cap on the state and local deduction (SALT) and $750,000 cap on the mortgage interest deduction for new mortgages. Permanent repeal of the phase-out of itemized deductions and other smaller miscellaneous individual itemized deductions.
Permanently increased estate and gift tax (“death tax”) and alternative minimum tax exemptions and phase-outs.
Permanent 20 percent deduction for pass-through business income.
Two-year extension of expanded deduction for medical expenses exceeding 7.5 percent of adjusted gross income, down from the pre-tax reform level of 10 percent, through 2020.
Making these provisions permanent will bolster the TCJA which has already benefited millions of American taxpayers and businesses, both large and small, throughout the country. This year alone, American households will save an average of $1,400 in taxes. Over the next 10 years, because of a larger economy, the typical American will benefit from over $26,000 more in take-home pay, or $44,697 for a family of four.
Contrary to Democrat class warfare talking points, low-income families benefit from the new tax law. The lowest income congressional districts benefit from some of the biggest reductions in federal income taxes. In New York’s 15th congressional district, where the average income is less than $36,000, taxpayers will keep 30 percent more of their hard-earned dollars. In California’s socioeconomically similar 40th district, low-income filers will save 21 percent.
The TCJA is keeping the economy firing on all cylinders – more than 700 companies have used their tax cut to create more jobs, hand out bonuses, or increase workers’ wages. By lowering marginal tax rates across the board, the TCJA has benefitted small businesses, investors, and entrepreneurs.
Edwin J. Feulner, Ph.D., founder and former president of The Heritage Foundation, summarizes the benefits of tax reform in his commentary, Upgrading to Tax Reform 2.0:
Americans from all walks of life have reason to be grateful for last year’s tax cuts. They’ve proved to be quite a boon. The ink was hardly dry before companies began offering workers bonuses and pay raises. Employment is on such an upswing that jobs outnumber job applicants. The typical household will enjoy a $1,400 tax cut this year. Average wages went up by 2.9 percent last month—the largest wage increase since 2009.
The Family Savings Act (H.R. 6757) and the American Innovation Act (H.R. 6756), both part of Tax Reform 2.0, are also beneficial. H.R. 6757 would create a new universal savings account, bolster the use of 529 education savings accounts, and allow families who need parental leave to dip into their savings. H.R 6756 would enable new businesses to write off more of their startup costs and encourage new innovation. Moving forward, Congress must prioritize making full and immediate expensing permanent. Combining full and immediate expensing for all business investments with permanent tax cuts would increase U.S. GDP growth to a robust 4.3 percent.
Congress is also unwilling to reduce the growth rate of federal spending, which drives up our debt and threatens the prosperity of future generations. The only way to truly make last year’s tax cuts permanent is to address Washington’s proclivity to spend future generations further into debt.
Despite the overwhelming economic benefits of tax reform to individuals of all income levels, Rep. Nancy Pelosi is threatening to repeal the tax cuts if Democrats take back the House this November. By passing the Family and Small Business Tax Cuts Act (H.R. 6760), Congress can protect our paychecks and ensure the tax cuts are here to stay.