The House introduced the Tax Cuts and Jobs Act, which is aimed to be a pro-growth bill that will give low and middle-class Americans a tax cut they haven’t seen in the last 31 years, according to Chairman of the House Ways and Means Committee Kevin Brady (R., Texas).
The congressman spoke to reporters on Capitol Hill Thursday, and said a middle-income family of four who earns $59,000 can expect to see a $1,182 tax cut under the proposal.
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"After 31 years, today marks the beginning of the end of America’s broken tax code," Brady said. "I feel like we just played the world series of tax reform and the American people won."
The proposal has five main goals, which include providing relief for middle-class families, streamlining and simplifying the tax code so that Americans can file on a postcard, cutting taxes for businesses, creating jobs and increasing wages for American workers, and encouraging businesses to bring back trillions of dollars from overseas.
On the individual side, the bill reduces the number of tax brackets to five and lowers rates to zero, 12 percent, 25 percent, 35 percent, and 39.6 percent for top earners. The bill doubles the standard deduction for families from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples. The measure also eliminates special-interest deductions so Americans can have the simplicity of filing their taxes on a postcard.
Brady said he wanted to insure that tax reform was family friendly and the legislation includes a new family credit, which increases the Child Tax Credit from $1,000 to $1,600. The chairman said that for the first time it will help parents as well, giving them a $300 credit for each parent and $300 credit for a nonchild dependent to help with everyday expenses.
The bill also preserves the Earned Income Tax Credit to give relief to low-income Americans. It also streamlines education savings so families can have more than a dozen ways to save for college tuition.
The legislation also promotes charitable giving and allows deductions for charitable contributions and preserves the home-mortgage interest deduction.
Brady said that the tax reform bill will repeal both the Alternative Minimum Tax and the death tax.
"The Alternative Minimum Tax is that second tax deduction," Brady said. "Next year, if we did not repeal it millions of Americans would have to file for a bigger tax the second time and on average they would pay $7,500 more. Most of those families are in high tax states."
"We provide immediate relief to family-owned farms and businesses that are damaged by the death tax," he said. "In year seven there will be full and permanent repeal of the estate tax. Eliminating the death tax not only eliminates double and triple taxation, it creates about 140,000 new jobs as well."
On the corporate side, the plan reduces the corporate tax rate to 20 percent from 35 percent, which is the largest corporate tax cut in American history. Businesses are also allowed to immediately expense new equipment as a result of the plan, which can help the skills of workers and boost jobs, paychecks, and productivity.
The bill keeps a low-income housing tax credit so businesses can invest in affordable housing. The measure also preserves the research and development tax credit to promote "Made in America" services and products.
Brady said the legislation will help keep jobs here in the United States since it prevents them from moving their headquarters and research overseas. Under the plan, the international tax system will be modernized so it won't be subject to a "worldwide" tax system that taxes many job creators twice.
"A typical small business on Main Street that makes about $62,000—that is our main street job creator—saves $3,007 a year in tax relief," Brady said. "And we drive almost half a trillion in tax relief for our main street job creators."