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“Major Simplification of the Tax System”: Tax Cuts and Jobs Act Benefited Workers, Families, and Small Businesses

December 08, 2023

Four Key Moments on the Tax Subcommittee Hearing on Tax Policies That Help Working Families and Small Businesses

WASHINGTON, D.C. – At a Ways and Means Tax Subcommittee hearing, members examined various tax policy proposals to consider how best to build upon the success of the Tax Cuts and Jobs Act (TCJA) and ease the tax burden on American workers, families, and small businesses. Some of TCJA’s pro-growth policies that fueled prosperity for working-class families have lapsed and the remainder are scheduled to expire in 2025. Under TCJA, economic growth was a full percentage point higher than CBO forecasted, wages increased by 4.9 percent – the fastest two-year growth in real wages in two decades – and working-class families saw their wages increase at a rate that was 50 percent higher than the rate for those with higher incomes.

Witnesses testified about various tax policy proposals, including a value-added tax, border adjustment taxes, and the Fair Tax – discussing their simplicity and their potential for lowering Americans’ tax burden. These are key areas of focus given how TCJA lowered the tax burden for small businesses and American workers, while raising the guaranteed (standard) deduction made tax filing easier and simpler. 

Democrats’ Tax Gameplan: Tax working class families and small businesses while pretending to target the wealthy.

History shows the true intentions of Democrats’ “tax the rich” rhetoric that they continue to embrace. Taxes, like the Alternative Minimum Tax and the income tax, which originally targeted the rich, were eventually paid by middle-income earners. Ways and Means Chairman Jason Smith (MO-08) expressed how family farmers, ranchers, and small businesses, who own productive property but are not personally wealthy, often fall in the Democrats’ crosshairs.

Chairman Smith: “Our Democrat colleagues are fond of suggesting Washington should tax the wealth of the American people. Most often, this manifests itself in trying to tax assets owned by individuals, which may sound like going after the wealthy but in the real world, it includes family farms or unrealized assets that are not helping the individuals who own them live a life of luxury. This is in line with the Democrats’ love of the Death Tax, as well. What would these so-called ‘wealth taxes’ actually mean for American families?”

Grover Norquist, Americans for Tax Reform President: It’s important to remember that when politicians say ‘We’re going to tax the rich,’ they haven’t finished the sentence. We’re going to tax the rich first. The Alternative Minimum Tax was to hit 155 people. Until the Republicans stopped it, it was headed to hitting 30 million. The income tax top rate, 7 percent, was going to hit people who made more than $11 million a year, in today’s terms. Now you don’t have to make $11 million to pay more than 7 percent. Half the country is doing that. They bring in the income tax – only the rich. Now, it’s just about everybody.

The tax code should incentivize U.S. investment and the American worker.

American businesses became more competitive worldwide thanks to the lowering of the corporate tax rate from a level higher than many European nations. Tax Subcommittee Chairman Mike Kelly (PA-16) asked the witnesses to elaborate how that helped American communities, workers, and businesses.

Dr. Alan Viard, tax policy expert: “I think that the Tax Cuts and Jobs Act did something very important and very useful when it reduced the corporate tax rate from 35 to 21 percent. It made no sense, as you said earlier, Mr. Chairman, for the United States to be so far out of the international alignment, to have a higher corporate tax rate than many socialist governments have in Europe. You would certainly expect that self-interested corporations would move their investment to the United States in response to this dramatically lower tax rate.

American innovation and productivity are at risk of falling behind our competitors.

Key tax policy reforms like research and development (R&D) expensing have helped American businesses boost productivity, increase paychecks, and create new jobs. Currently, these pro-growth policies are being phased out, threatening the innovation American businesses need to compete in a global economy. Rep. Ron Estes (KS-04) asked how restoring full R&D expensing would help workers.

Rep. Estes: “Mr. Norquist, what negative effects have you seen as a result of the R&D amortization? Do you agree that restoring immediate R&D expensing will help spur economic growth and jobs in the United States?”

Grover Norquist, Americans for Tax Reform president: “Expensing on R&D and, in fact, all investment reduces the cost of that investment. As you point out, some people seem to think corporations pay taxes. People pay taxes. Consumers pay taxes. Workers get paid less. Companies spend about 70 percent and higher of the money they get on workers. So when you take $1 out of a corporation, 77 percent of it came out of the workers…R&D expensing investment will increase the amount of investment you get, make people more productive, and grow the economy, which will allow us to hopefully grow away from the debt that we have now, as we did after World War II.”

Ways and Means Republicans have already voted to lower and simplify taxes for millions of working families.

During the hearing, supporters of various tax reforms touted the benefits of simplifying the tax code – a key point for ideas like a consumption tax. Additional ideas include one that Ways and Means Republicans passed earlier this year, in Rep. Nicole Malliotakis (NY-11)and Rep. Michelle Steel (CA-45)’s Working Families Tax Cut Act. This proposal increases the guaranteed deduction by $4,000 for families. For working families, increasing the standard deduction both puts more money back into their pocket to help with high prices and simplifies preparing and filing income taxes. 

Rep. Malliotakis: “What would my legislation of a guaranteed deduction bonus mean for American families in this economy?”

Grover Norquist, Americans for Tax Reform president: “It’d be a help. It would reduce the cost of government to people and that makes it a little easier to get through life.

Dr. Alan Auerbach, economist and tax policy professor: “In addition to the much-needed income it would provide to families, I would add, it would also represent a major simplification of the tax system. Because one of the things that TCJA did by increasing the standard deduction and by capping itemized deduction was make it desirable for most people to claim the standard deduction, which is a great simplification. Increasing the standard deduction would further that process and that is a major benefit of simplification.”