Over the weekend, advocates, economists, and reporters tackled some of the false charges levied against the Tax Cuts and Jobs Act (H.R. 1) and explained how the bill will help Americans of all walks of life.
Americans for Tax Reform, led by Grover Norquist, pushed back on the notion that the Tax Cuts and Jobs Act includes a new, higher tax rate for the wealthiest Americans:
“H.R. 1 does not create a new, higher tax bracket. It is simply a phaseout of the 12 percent bracket for those within the top bracket. Bubble rates were a feature of President Reagan’s landmark 1986 tax reform legislation.
“H.R. 1 is also consistent with the Taxpayer Protection Pledge, a written commitment to constituents made by 209 members of the House of Representatives including House Speaker Paul Ryan and Ways and Means Chairman Kevin Brady.”
Stephen Moore of the Heritage Foundation and Alfredo Ortiz, President and CEO of the Job Creators Network, explained how the Tax Cuts and Jobs Act will lower rates on Main Street job creators of all sizes:
“We believe the small business employers who hire well over half of American workers are big winners here, and kudos to President Trump and House Republicans for giving them long overdue relief. …
“The bill calls for a new 25 percent top marginal small business tax rate, down from the current 39.6 percent rate on successful businesses. This reform will allow millions of American manufacturers, retailers, and other small businesses to keep more of their earnings necessary to compete with their big business and international competitors. It will also help keep them located here in the United States.
“There are caveats to the new 25 percent rate. First, only 30 percent of qualifying earnings can be considered business income and subject to this new rate. The other 70 percent will be considered wage income and will be taxed at the new individual tax rates. By the way, the current 39.6 percent rate on America’s small businesses is one of the highest in the world. Most other nations already provide a lower tax rate for the small entrepreneurial firms.
“Why this 30-70 split? This is a much-needed guardrail to prevent taxpayers from gaming the system by simply shifting their wage income to business income. …
“Remember, small business owners pay their taxes through the individual tax code. This means they will save from many features of the tax plan, such as the doubling of the standard deduction and the lower rates across the income spectrum. These two provisions alone will save ordinary small businesses thousands of dollars a year in taxes that can be reinvested back into their businesses, employees, and communities. …
“One of our favorite reforms that isn’t getting much attention is that businesses will get an immediate tax write-off for their capital investment expenses, such as computers, trucks, buildings, equipment, technology, and so on. This tax incentive will highly motivate small employers to expand their operations, which is good for everyone.
“Similarly, full loan interest expensing means businesses can fully deduct interest expenses, making the debt most businesses need to start and expand a little more manageable. It may even make it easier for start-up companies to get the loans they need, which have been hard to get of late, to provide the seed capital to get growing.”
The Washington Post dispelled the myth that reforming the mortgage interest deduction for future mortgages would hurt homeowners:
“Under the proposal, homeowners would only be able to deduct interest on the first $500,000 of mortgage debt, half of the current $1 million threshold. The change would not affect existing mortgages, only mortgages on purchases made after the law is in force.
“Owners of expensive homes would still be able to take the deduction on their first $500,000 of mortgage debt. If you have a $550,000 mortgage, for instance, you’d be able to deduct the interest on all but the last $50,000 of principal owed.
“Nationwide, only about 6 percent of new mortgages are valued at over $500,000, according to a report by the United for Homes campaign, a group that advocates for reforming the MID and making housing more affordable for low-income families. That figure is based on an analysis of mortgages issued in the United States between 2013 and 2015. If your mortgage is over $500,000, in other words, you’re already in the top tier of American homeowners. …
“If half-million dollar homes account for a small portion of the mortgage market, in other words, they affect an even smaller share of the total U.S. population. That share of the population is likely to be fairly well-off: if you can afford a down payment and monthly payments on an $600,000 house, for instance, you’re not exactly struggling financially.
“Further compounding the issue, the mortgage interest deduction is one of the reasons home prices across the country are so expensive to begin with. A working paper published earlier this year by economists at MIT, Princeton and the University of Copenhagen concluded mortgage interest deduction induces homeowners to ‘buy larger and more expensive houses.’ …
“It’s hard to square those findings and the overall modest impacts of the GOP proposal’s mortgage interest change with the apocalyptic rhetoric (“eviscerates existing housing tax benefits”) coming from its opponents.”
As Ways and Means Committee Chairman and lead sponsor of the Tax Cuts and Jobs Act, Kevin Brady (R-TX), said in an MSNBC interview last week in response to many of these claims:
“The truth is this whole tax reform is designed for the middle-class family that’s working so hard or that main street business that’s working so hard. I think what you just said are the talking points from 15 years ago. I think the public is tired of hearing it, they’re really ready for change. Again, simplifying the code, getting rid of all these special provisions for lobbyists and all the loopholes – this is what America really is dreaming of.”
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