November 15, 2017
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As the House and Senate each consider their plans to cut taxes and grow jobs this week, the Left and their friends in the media will try to provoke division by narrowing in on differences between the two chambers’ bills.
However, Americans (including members of Congress) should remember both the House and Senate versions of the Tax Cuts and Jobs Act share many of the same attributes, all of which will grow the economy, create jobs, and help Americans keep more of their hard-earned money.
For starters, both the House and Senate bills will nearly double the standard deduction. Both plans increase the standard deduction for individuals from $6,350 to $12,000 and from $12,700 to $24,000 for married couples. This represents a significant tax cut for lower- and middle-income earners, as well as a widespread simplification, as many people will save time and money by taking the larger standard deduction rather than itemizing their taxes.
Both plans also increase the Child Tax Credit. The House bill calls for boosting the credit from $1,000 to $1,600 per child under 17, while the Senate plan increases the credit to $1,650 and makes it available for eligible taxpayers with children under 18. Although these two provisions are not identical – they still represent a significant dollar-for-dollar tax credit for families with children who are struggling to make ends meet.
Small businesses, which represent 99.7 percent of our country’s employers, also benefit from a tax reduction under both plans – though the bills go about it in slightly different ways. Under the House plan, small business owners who earn less than $150,000 in business income will receive a 9 percent tax rate on their first $75,000. (For unmarried small business owners, the thresholds are $75,000 and $37,500, respectively.) For those small business owners earning a higher income, the House bill places a 25 percent tax rate cap on 30 percent of their business income. A larger share of their income can be eligible for the 25 percent rate depending on how much they choose to invest in their businesses. In comparison, under the Senate plan, small business owners are allowed to deduct 17.4 percent of their income. As the two chambers work to combine their bills, we will likely hear more about the benefits and reasoning behind both proposed methods.
However, regardless of approach, the important point is that both bills seek to grant historic tax relief to the men and women who help make our economy run. This will give them more money to invest in their businesses, creating more jobs, and raising wages for workers.
Both chambers’ plans also seek to spur our already growing economy by reducing the corporate tax rate from 35 percent to 20 percent. While it’s true the House would implement the new rate immediately and the Senate would delay the tax cut until 2019, the intention behind these provisions is the same – to grow the economy, create jobs, and attract more businesses to the United States so that our nation is able to more effectively compete with other developed countries.
In the same vein, the House and Senate bills also seek to help make the United States more competitive by changing the way we tax income that American companies earn overseas. As it is now, multinational corporations based in America owe taxes both in the foreign country in which they are doing business, and also in the U.S. when their profits are repatriated. However, businesses do not have to pay taxes twice if they reinvest their foreign earnings in foreign countries, rather than bring their earnings back to the U.S. This is a terrible system that provides financial incentives for businesses to keep jobs and profits outside of the United States. Both the House and Senate bills put in place a territorial tax system that puts an end to the current system and instead encourages U.S. businesses to invest foreign earnings here at home, rather than overseas.
These are just a few of the similarities the bills share, but there are many others, including protecting important deductions for mortgage interest and charitable giving, eliminating the alternative minimum tax, and providing relief from or abolishing the so-called death tax.
The news media is going to try to amplify every difference, however small, between the two bills in an attempt to foment a fight between Republicans in the House and Senate, but Republicans must not get distracted or lose their focus.
No policy disagreement is more important than growing the economy, creating jobs, and helping hardworking Americans keep more of their money.
That’s the common ground.
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