Nov 17 2017
Things are looking up for Utah families.
This Tuesday, the Senate Finance Committee released a revised version of the Tax Cuts and Jobs Act. This version included two key changes that make the bill much better for Utah families.
First, the revised bill expanded the Child Tax Credit from $1,000 under current law to $2,000. This increase solved a potentially huge problem for working Utah families in tax reform. The original tax bill only increased the CTC to $1,650. It also eliminating the personal exemption, a tax provision that benefits many working families. This could have meant a tax hike for many Utah families, but by increasing the CTC to $2,000 the new bill avoided that mistake.
According to the Tax Foundation, a family of four making $85,000 per year would get a $1,554 tax cut under the new Senate bill. And thanks to economic growth, the average middle-income Utah family would eventually see an extra $2,969 in after-tax income every year.
The revised Senate bill also would repeal Obamacare’s individual mandate, a provision that the Supreme Court ruled was a tax in 2012. By eliminating this tax penalty, millions of Americans families will no longer be punished for not purchasing expensive health insurance policies they do not want.
Democrats claim that repealing the individual mandate would kick 13 million Americans off of their health insurance policies. But that claim could not be further from the truth, as a Washington Post fact check makes clear.
It is true that five million Americans will choose not to enroll in Medicaid when they are not forced to do so by a government mandate. It also is true that an additional two million Americans will choose to decline employer-sponsored health care in return for higher wages. But these seven million people are all choosing to forego health care of their own accord. Nobody is depriving them of anything.
If the individual mandate is repealed, another 5 million people who currently buy health insurance on the Obamacare exchanges will discontinue those policies. But many of those people would have gotten subsidies to cover the cost of Obamacare premiums. And those who do not qualify for premiums can buy unregulated health-care plans that better fit their needs.
The corporate tax cut in the original version of the bill will be more good news for working families. Yes, some of that tax cut will go to the stockholders of corporate entities—but a lot of that money will go instead to new jobs and higher wages.
Economists disagree on the precise breakdown, but the consensus is that lost wages make up between one-quarter and one-half of corporate tax revenue. According to the Tax Foundation, the Senate tax plan would lead to a 3.7 percent increase in economic growth, 925,000 more jobs, and 4.4% higher after-tax income.
As good as this bill is— and it is good—it is not perfect.
Many Utah families pay far more in Social Security and Medicare payroll taxes than they do in income taxes. As written, the current Senate bill would provide these families little relief.
There is a solution to this shortcoming. If we make the Child Tax Credit refundable up to the amount that families pay in payroll taxes, then the credit would be far more beneficial to those families that most need extra cash in their pockets.
The bill as written also reduces federal revenues by almost $1.5 trillion. By itself, this is not a problem: The federal government shouldn’t be taking so much of our money! But if this tax cut is not followed by significant spending cuts, it will hand the next generation an unacceptable debt burden
My colleagues have done a fantastic job on tax reform so far. If we can just make the Child Tax Credit refundable against payroll taxes—and if we can then pledge to address our nation’s spending addiction—it will be a huge win for Utah families.