Recently, after years of discussion over tax reform ideas, the Senate passed legislation that will provide tax cuts for middle-class families and make our tax code competitive so America can once again become the best place in the world to do business.
The most immediate benefit will be the tax cuts for the middle class. For more than a decade, expenses have increased — health care being the biggest expense — while wages have stayed generally flat. Republicans and Democrats alike have called for relief for people feeling this middle-class squeeze — and the Tax Cuts and Jobs Act will finally deliver it.
Our plan will double the child tax credit to $2,000, double the standard deduction to $24,000 per family and lower tax rates for families across middle-class income brackets. The independent Tax Foundation estimates that a single parent with two kids earning $52,000 a year would see a 36 percent reduction in their taxes. A family with two kids earning $85,000 a year would see a 20 percent reduction in their taxes. And a family with two kids earning $165,000 a year would see an 8 percent reduction in their taxes.
For Ohio, the Tax Foundation estimates this means that a family of four at the median income level will save about $2,400 a year on their taxes. For a family in Akron, or across the state, that money staying in your pockets rather than going to Washington can help make a car payment, pay for health care or save for retirement.
Middle-class families will get immediate relief through the tax cuts in this plan, but families will also benefit from reforms on the business side in the form of more jobs and higher wages in America.
A recent study by the accounting firm Ernst & Young said that since 2004, there would be 4,700 more American companies today if we had a 20 percent corporate tax rate, which this bill includes. Our broken tax code has encouraged companies to move jobs and investments overseas and has forced our workers to compete with one hand tied behind their back. It’s crazy that Congress has allowed this to happen, and this tax reform bill will finally fix it.
The result, the Tax Foundation says, will be nearly 1 million new American jobs — and more than 35,000 new jobs in Ohio.
This tax reform plan will also level the playing field internationally for American workers and businesses. There is between $2.5 trillion and $3 trillion of U.S. company earnings trapped overseas because of the way we tax foreign profits. This bill encourages companies to bring that money and the jobs and investment connected to it back here, and the result will be higher productivity, better wages and a stronger economy.
Some have claimed that this plan will be bad for the deficit, but I believe these reforms are likely to have the opposite effect.
The pro-growth changes in this bill will help drive economic growth. More than 100 economists from across the country wrote a letter to Congress recently stating, “Economic growth will accelerate if the Tax Cuts and Jobs Act passes.” How much it will accelerate can be debated, but they suggest that a 0.4 percent increase in economic growth will generate $1 trillion in new revenue.
Maybe most important, because of the budget process, the economic growth projection Congress is forced to use assumes just 1.9 percent annual growth over the next 10 years. Many economists believe we can and will do better than that. We’ve grown at 3.1 percent and 3.3 percent the past two quarters.
The national average over the past 30 years is more than 2.5 percent. An anemic 1.9 percent growth can’t be the new normal, and I believe the pro-growth changes in this bill are one of the most important ways to give our economy a needed shot in the arm. With annual growth at just 2.3 percent, this tax reform plan would result in deficit reduction.
The Tax Cuts and Jobs Act is a responsible plan that will give families the freedom to spend more of their own money how they see fit, will allow American workers to compete in the global market and will create a fairer tax system that encourages jobs and investments in the United States.
Rob Portman is a United States senator from Ohio.