The GOP’s top tax writer said in a speech Thursday that Republicans’ newly released tax reform plan will significantly strengthen the economy.
“If we want to unleash the vast potential of this nation through tax reform, we have to start by unleashing the individual potential of every American, and giving you the chance to put your talents into action, giving you the chance to build a better life for yourself, peruse your own American dream, whatever that may be,” Rep, Kevin Brady, chairman of the House Ways and Means Committee, said at an event at The Heritage Foundation.
“So, specifically, tax reform for middle-class Americans means more jobs, bigger paychecks, and fairer taxes,” the Texas Republican added.
- Bigger Paychecks
“Under our unified framework, this …[will be] the lowest tax rates in modern history, for American businesses of all size, in all structures,” Brady said. “We also lower rates for families and we flatten out the code from seven brackets to three.”
The framework from House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, and other GOP leaders calls for roughly doubling taxpayers’ standard deduction (an individual’s first $12,000 of income would become tax free, and the first $24,000 for married couples), and condensing the current seven tax brackets to three.
Depending on their income, individual taxpayers currently may be taxed at one of these percentages: 10, 15, 25, 28, 33, 35, or 39.6.
The three brackets in Republicans’ proposed tax framework are 12 percent, 25 percent, and 35 percent.
“The reason we do this is simple,” Brady said. “Every dollar of income that American families and businesses can keep and put towards their American dream is a dollar that grows our economy, creates jobs, and expands opportunity.”
Lawmakers should look to history, Brady said, if they want to get partisan about Republicans’ tax reforms.
“If I hear any more Democrats talking about the bottom rate is going up, I’ll remind them they might want to contact Vice President Joe Biden, Vice President Al Gore, perhaps Secretary John Kerry because they voted with President [Ronald] Reagan to lower that 11 percent rate to zero just as we are lowering the 10 percent rate to zero as well,” Brady said.
Reforming the tax code has been paramount for President Donald Trump during his first year in office, and Treasury Secretary Steven Mnuchin has promised to deliver it by the end of 2017.
The last time the tax code was updated was in 1986 with Reagan’s Tax Reform Act.
- More Jobs
“To truly unlock the growth of paychecks nationwide, we also have to unleash business investment in the United States,” Brady said. “That’s why, for the very first time, we are offering our businesses the ability to fully write off their purchases of new equipment they need to produce and compete at a higher level in year one.
Part of this goal is offering full expensing, Brady said, a practice that “would let businesses immediately deduct expenses from their income,” according to the Bloomberg Bureau of National Affairs.
“With full expensing, in year one, we are not just making it easier and more affordable for businesses to invest in fiscal capital, like new equipment and software technology, we are making it easier for them to invest in human capital,” Brady said.
Lowering the corporate tax rate will also boost the economy, Brady said.
“On the business side, our job creators will … no longer have to bear America’s 35 percent corporate tax rate, the highest in the developed world,” he said. The GOP tax plan calls for lowering corporate tax rate to 20 percent.
The tax plan would also make easier for businesses that have moved overseas to return to the U.S.
“We are finally moving America to a modern, territorial tax system,” the Texas congressman said, adding:
Unlike the rest of our international competitors, America still forces our businesses to pay U.S. tax on their earnings overseas. These taxes come on top of what our companies are already paying in taxes in other countries. So not only does it make it more difficult today for our businesses to compete globally, our current tax code makes it more attractive to keep their earnings abroad and invest it in growing foreign operations.
Another component, Brady said, is repealing the estate tax, which the Tax Policy Center calls an “additional tax on a transfer of property.”
Opponents call it the death tax or the generation-skipping transfer tax.
“We are dedicated and determined to repeal the death tax,” Brady said, adding:
For the first time in over a hundred years, owners of family farms and owners of family-owned businesses won’t have to fear double or even triple taxation when they pass down their life’s work to their kids or their grandkids. They will have real peace of mind … and keep building that business, creating more jobs and gowning paychecks for families across the country.
- Fairer Taxes.
“This perhaps is the most personal and perhaps the most important goal we have had,” Brady said, adding:
It’s about, for the first time in decades, having a tax code that respects the time and the take-home pay of all Americans, especially the middle class. It is centered around delivering a tax code that is simpler, less stressful, more supportive of American families as they pursue what makes you happy.
Part of this, Brady said, is eliminating special interest loopholes and carve-outs that frustrate the middle class.
It also includes repealing the alternative minimum tax, which was created in 1969 to ensure that more affluent taxpayers could lower their tax bill only via deductions a certain amount.
Many lawmakers, including Sen. Ted Cruz, R-Texas, previously called for an end to the alternative minimum tax.
“We are repealing the alternative minimum tax so millions of families no longer have to spend time and money calculating their taxes twice each year,” the House Ways and Means Committee chairman said, adding:
And ultimately, this delivers a tax code so fair, and so straightforward, that 9 out of 10 Americans will be able to file your taxes on a form as simple as a postcard or even as easy as ordering a pizza on your smartphone. Imagine that.
Brady thanked experts at The Heritage Foundation, which in 2016 released “Blueprint for Reform: A Comprehensive Policy Agenda for a New Administration in 2017,” for the organization’s influence in the process.
“There’s no doubt that Heritage has helped shape in a major way this bold tax reform but the value of Heritage is that through ideas, you have helped shape a generation of tax reformers,” Brady said. “And I want to thank you, your team, your experts for helping shape [tax reform].”
The next big priority to making tax reform a reality is passing a budget, Brady said.
“We certainly have legislative hurdles to overcome,” Brady said. “In the most immediate term, it is passing a budget that provides our runway to land bold tax reform on. From there, members of the Ways and Means Committee and the Senate Finance Committee will craft tax reform legislation to this framework that delivers more jobs, bigger paychecks, and fairer taxes.”
He is confident though that reform can happen within the year.
“Like President Reagan in 1986, President Trump fully supports the unified approach that we are taking,” Brady said. “Working together, I am confident and optimistic that we’ll get tax reform to his desk this year.”