The Tax Cuts and Jobs Act is Working for the Middle Class

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Posted by Alex Hendrie on Wednesday, March 27th, 2019, 8:00 AM PERMALINK

The House Ways and Means Committee is holding a hearing entitled, “The 2017 Tax Law and Who it Left Behind.”  While the Democrats argue that the tax cuts are overwhelmingly benefiting the wealthy, nothing could be further from the truth.

The Tax Cuts and Jobs Act has grown the economy, reduced taxes for the middle class, given workers a pay raise and new employee benefits, reduced utility costs, and given families relief from Obamacare.

The Economy is Strong Following the Tax Cuts

  • GDP growth was 3.1 percent between Q4 of 2017 and Q4 of 2018, according to the Bureau of Economic Analysis.
     
  • Over 2.6 million jobs were created in 2018 and over 5.1 million jobs have been created since the beginning of 2017 according to the Bureau of Labor Statistics.
     
  • Nominal wages have grown by 3.4 percent over the last year, a ten-year high.
     
  • Job openings sit at almost 7.6 million, a record high.
     
  • The unemployment rate is at 3.8 percent. In September, the unemployment rate hit 3.7 percent, a 50 year-low.
     
  • In October, the U.S. was named the most competitive economy in the world, according to the World Economic Forum.
     
  • Gross private domestic investment grew by over 7 percent between Q4 of 2017 and Q4 of 2018.
     

Middle Class Families are Seeing Strong Tax Reduction

  • A family of four with annual income of $73,000 (median family income) will see a tax cut of more than $2,058, a 58 percent reduction in federal taxes.
     
  • A single parent with one child with annual income of $41,000 will see a tax cut of $1,304, a 73 percent reduction in federal taxes.
     
  • 91 percent of taxpayers with annual income between $64,000 and $108,000 saw an average federal tax cut of $1,400 in 2018, according to the left of center Institute for Taxation and Economic Policy.
     
    • Similarly, 90 percent of taxpayers with annual income of between $40,000 and $64,000 saw an average federal tax cut of $810, while 87 percent of taxpayers with annual income between $108,000 and $232,000 saw an average federal tax cut of $2,710.
       
  • The Tax Cuts and Jobs Act doubled the standard deduction for an individual from $6,000 to $12,000 and for a family from $12,000 to $24,000. 105 million Americans took the standard deduction in 2015 according to the IRS statistics of income (SOI) database.
     
  • The Tax Cuts and Jobs Act doubled the child tax credit from $1,000 to $2,000 per child, benefiting 22 million families that took the Credit.
     
  • The Tax Cuts and Jobs Act raised the threshold of the Alternative Minimum Tax so fewer taxpayers are forced to comply with the provision. 4,464,430 families and individuals paid the Alternative Minimum Tax in 2015.
     

Businesses Have Created New Employee Benefit Programs.

  • Walmart and Lowes now provide $5,000 to help cover the cost of adopting a child.
  • Express Scripts in Missouri has created a $30 million education fund for their employees’ children.
  • Boeing provided $100 million in workforce development programs
  • McDonald’s employees who work just 15 hours a week receive $1,500 worth of tuition assistance every year per year.

Businesses Have Also Increased Wages and Given Bonuses to Their Employees.

  • Wichita Railway Services is giving its five employees tax reform bonuses of between $3,000 and $6,000.
  • Wells Fargo raised base wages from $13.50 to $15.00 per hour.
  • Anfinson Farm Store – a family owned business in Cushing, Iowa (population 223) – has given its employees a $1,000 tax reform bonus and raised wages by 5 percent.
  • AT&T provided $1,000 bonuses to 200,000 employees. 
  • Kentucky-based Turning Point Brands, Inc. will give 107 employees a $1,000 tax reform bonus.Cigna raised base wages to $16 per hour.
  • Apple provided $2,500 employee bonuses in the form of restricted stock.
     

Utility Companies in All 50 States Are Passing on the Tax Savings in the Form of Lower Rates for Customers.

This means lower electric bills, lower gas bills, and lower water bills for Americans than if the corporate rate cut had not occurred. For example: 

Tax Reform Gave Middle Class Families Relief From the Obamacare Individual Mandate Tax Penalty

  • Obamacare imposed a tax penalty of $695 for an individual and $2,085 for a family of four for failing to buy “qualifying” health insurance as defined by the federal government. The Tax Cuts and Jobs Act repeals this unfair tax.
     
  • The Obamacare individual mandate tax penalty is one of the most regressive taxes in the code as it disproportionately impacts low and middle-income families:
     
    • In tax year 2016, 4,953,490 households paid a total of $3,628,017,000 in individual mandate tax penalties. 77 percent of those paying the mandate had annual income of less than $50,000. 34 percent of those paying the mandate had annual income of less than $25,000.
    • In tax year 2015, 6,665,480 households paid a total of $3,079,255,000 in individual mandate tax penalties. 79 percent of those paying the mandate had annual income of less than $50,000. 37 percent of those paying the mandate had annual income of less than $25,000.
       

Photo Credit: Gage Skidmore

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