It is time to pass tax reform
I suppose it should be no surprise, but the federal tax reform package — officially dubbed the Tax Cuts and Jobs Act — continues to generate the most insane, outlandish reactions possible.
The foolishness came to a head on Sunday as professional protesters with apparently absolutely nothing else to do, showed up at Sen. Susan Collins home carrying signs like, “support people, not billionaires.”
Apparently, once you achieve enough success to be worth 10 figures, your status as a “person” is surrendered to the government. But I digress.
The absurd spectacle, if you can call it that given its pathetically small size, was just the latest hyperbolic attempt to convince people that, as my colleague Lance Dutson wrote Monday, “the rapture is upon us.”
As he correctly points out, the left’s bad habit of calling everything that they oppose the worst thing ever to happen, has desensitized the public to listening to any critiques they may have, whether they are valid or not.
This is why, despite their best attempts, they have been unable to bully members of Congress, including Collins, into buying into their apocalyptic rhetoric on taxes.
And it is a good thing, too, because even though the bill isn’t perfect, it is certainly a major step in the right direction.
Setting aside the economic effects of the bill, for good or for ill, tax reform basically boils down to one theory of governance which I, and hopefully you, agree with wholeheartedly: making the tax code cleaner and more transparent, and letting you keep more of your own money.
These are important goals that all of Maine’s elected officials should support.
The tax reform bill that is emerging from a congressional conference committee puts money back in your pocket in a number of very important ways.
First, the standard deduction would be doubled, allowing taxpayers to exempt more of their income from taxation. Taxpayers with children also would receive a $2,000 child tax credit, which is twice its current size.
Meanwhile, simplification of the code — something every elected official I have ever talked to, regardless of party, claims to support — is a hallmark of the bill, consolidating brackets and lowering rates.
These changes and the economic growth that would be generated, would mean that a typical middle-class family in Maine would see an increase in take home pay of over $2,200. That’s real money.
And there are other, less obvious but no less important, ways it will save most of us money. Think, for example, of the benefit of simplification on your tax preparation costs.
A recent study by the National Taxpayers Union Foundation found that compliance with our complex tax code imposes costs that total $262.6 billion on taxpaying businesses and individuals. Approximately 94 percent of taxpayers pay a professional preparer or utilize tax preparation software to calculate their tax liability.
Real tax reform would help taxpayers cut down significantly on costs associated with filing taxes by allowing the majority of taxpayers to file their returns on the much dreamed for tax postcard.
The bill also contains provisions to grow the economy, which completely invalidates the supposed loss in revenue that critics continue to harp over, but will also increase wages and give us all more take home pay. A lower corporate tax rate will keep businesses in the country and boost worker incomes by as much as 20 percent in the long run.
All told, the nonpartisan Tax Foundation estimates that the long-run impact of the tax reform package would be an increase in GDP of 3.7 percent, an increase of after-tax incomes by 4.4 percent, and the addition of 925,000 jobs.
Some have voiced concerns that the plan’s proposed elimination of the state and local tax deduction would harm middle-class taxpayers. But currently only 30 percent of taxpayers choose to itemize rather than claiming the standard deduction. These itemizers tend to be wealthier than the average taxpayer — 78 percent reported an adjusted gross income over $50,000.
Under the tax reform bill, with the doubling of the standard deduction, the Joint Committee for Taxation estimates that a mere 6 percent of taxpayers will itemize their deductions.
Big picture? Mainers deserve more of the money they’ve earned in their pockets, as well as fundamental tax reform that encourages economic growth. That’s why this bill represents a real opportunity to make lasting, significant change to our tax code and economy.
That’s why those representing Maine in Congress should make sure that this opportunity is not squandered.
Matthew Gagnon of Yarmouth is the chief executive officer of the Maine Heritage Policy Center, a free market policy think tank based in Portland. A Hampden native, he previously served as a senior strategist for the Republican Governors Association in Washington, D.C.