Last week, after a lot of discussion about tax reform over a lot of years, the Senate took a major step toward fixing our broken tax code by passing the Tax Cuts and Jobs Act. This bill will help middle-class families and improve our economy for every American.
Now we are working to reconcile the House and Senate-passed bills so we can put a final bill on the president’s desk before Christmas.
There are three main parts of this tax reform proposal, all three of which are important for Ohio.
The first is a tax cut for the middle class. Right now, too many Ohio families are dealing with flat wages but rising expenses, health care being the biggest cost. These tax cuts will help address the middle-class squeeze by putting more money in your pockets.
This bill will lower tax rates for families, double the child tax credit, and double the standard deduction to $24,000 per family. We know from the independent Tax Foundation that these reforms will benefit families across middle-class income brackets. For example, a single parent with two children earning $52,000 a year would see a 36 percent reduction in their tax liability. A family with two children earning $85,000 a year would see a 20 percent reduction in their tax liability. And a family with two kids earning $165,000 a year would see an eight percent reduction in their tax liability.
The Tax Foundation also estimates that the tax cuts in this proposal will save a median income Ohio family nearly $2,400 a year on their taxes. That extra $2,400 immediately helps working families pay for gas or groceries, save for retirement, make a car payment, or pay for health care.
Second, beyond the middle-class tax cut, this tax reform plan will help create more jobs and higher wages. Right now, American workers and businesses are competing with one hand tied behind their back because of our broken tax code. If we lower our business tax rate below the average of the other industrialized countries, the result will be more jobs and industry — and lift our entire economy.
It is crazy that our broken tax code provides incentives for companies to send jobs and investment overseas. A recent Ernst & Young study said that since 2004, there would be 4,700 more American companies today if we had a 20 percent corporate tax rate, which this plan includes. This is a great way to bring more jobs and investment back to America.
Finally, this bill levels the playing field internationally for American workers and businesses. Right now, there is between $2.5 trillion and $3 trillion of U.S. company earnings trapped overseas because of our outdated tax code. Our tax reform plan encourages companies to bring that money back here and to invest in America. The result of all these changes, the Tax Foundation says, will be nearly one million new jobs for the U.S. and more than 35,000 more jobs in Ohio.
There is a broad consensus that our current tax code is hopelessly broken, and we have to fix it.
With real tax reform, Congress has a chance to deliver on our promise to help create a stronger economy with more jobs, higher wages, and a better future for Ohio families.
The Senate has taken a major step forward in making good on that promise. Now it’s time to find common ground with the House and deliver an early Christmas present to the American people.