By Ways and Means Committee Chairman Jason Smith (MO-08)
Republicans are already hard at work to once again deliver for working families and small businesses by building on the success of the Tax Cuts and Jobs Act next year. The 2017 tax law is a blueprint for prosperity that should be made permanent, and all options are on the table to ensure the biggest winners continue to be low- and middle-income people.
As chairman of the chief tax-writing committee in Congress, extending the 2017 Trump tax cuts and preventing President Joe Biden’s plan for a nearly $7 trillion tax increase on everyone in 2025 is my top priority. I have also made clear that any future tax reform proposals must put working-class people and the small businesses in their communities first.
The Ways and Means Committee has held hearings across the country this past year to hear from those on the front lines of America’s economy. Everywhere we went, we heard the same thing: The Trump tax policies worked and are the key to pulling us out of the economic tailspin Biden has caused.
Pro-growth tax policy has shown time and time again to be the best way to lift people out of poverty and put them on a path to a better future. Following passage of the 2017 Trump tax cuts, real median household income rose by $5,000, the economy outperformed expectations, wages grew faster than they had in 20 years, and the poverty and unemployment rate reached their lowest levels in 50 years.
A 2025 tax cuts bill must not only look to renew existing tax policies to prevent a massive tax increase on working people, such as the doubled child tax credit and guaranteed deduction, but it should also embrace new and innovative tax relief ideas that put workers, families, farmers, and small businesses first.
Former President Donald Trump’s recent proposal to eliminate income taxes on tips is a straightforward way to deliver immediate relief to working people and let them keep more of their hard-earned money. In 2022, there were at least 5.5 million people whose take-home pay was largely or in part comprised of tip wages. The average salary of waiters and waitresses, who make up the bulk of this group, is just over $35,000. Eliminating income taxes on tip wages is just one example of common sense pro-worker tax policy to provide targeted relief to people, especially when you consider the similarity between a tip and a gift, which an individual can already otherwise receive tax free.
But while Trump and my fellow Republicans in Congress are hard at work developing a plan to extend the 2017 tax cuts and provide immediate tax relief for people, Biden is fighting to end the Trump tax cuts for families, workers, and small businesses. If he gets his way, a family of four making $75,000 today will owe Uncle Sam an extra $1,500 in taxes, in addition to the 20% inflation tax people have paid since he became president. This will come on top of the Biden administration’s ongoing efforts to increase IRS audits on low- and middle-income earners.
In contrast, following the 2017 Trump tax cuts, the bottom 20% of earners saw their federal tax rate fall to the lowest level in 40 years, and people earning under $100,000 had their taxes cut on average 16%, all while the share of taxes paid by the richest people increased.
People saw the benefits of these tax policies, and they have now felt the consequences of the Left’s tax-and-spend agenda: a stagnant economy, inflation above 3% for 38 consecutive months, and the highest interest rates in 23 years.
If 2025 is the Super Bowl of tax, the two sides could not be clearer. I believe voters will be rooting for the team on the side of lower taxes, higher wages, and economic prosperity.