In Washington, the tax reform process continues to move steadily forward, increasing the likelihood that Floridians will be able to keep more of their own money next year. While it has been the subject of a great deal of criticism (and outright misleading charges), the tax reform bill promises simplification, cuts and economic growth. It will benefit families and businesses throughout the state, and Florida’s elected leaders in both the U.S. House and Senate should get behind it.
First and foremost, the tax reform plan aims to spark the economy. Lower corporate income taxes will reduce the incentive for businesses to relocate overseas, keeping jobs here in the United States. Overlooked is the fact that corporate taxes are mostly paid by workers. Consequently, the bill’s estimated $4,000 boost to worker wages could actually understate the full benefits of a corporate tax cut.
The tax reform bill also includes significant benefits for small businesses. It provides pass-through businesses with a 20 percent deduction while simultaneously cutting tax rates across the board. These reforms create more revenue for small businesses in a way that does not significantly increase compliance burdens.
Individuals and families in Florida can also look forward to substantial tax simplification. The National Taxpayers Union Foundation estimated that tax code compliance cost the economy approximately $262.2 billion in 2016. This significant burden in time and money falls on both individuals and small businesses; an estimated 94 percent of individual taxpayers and 85 percent of small businesses must seek outside help simply to file their taxes.
Furthermore, the bill’s doubled standard deduction means that the percentage of Americans that choose to itemize their taxes will drop from approximately 30 percent to 10 percent, making tax filing simpler. Business expensing, a repealed alternative minimum tax, and a higher estate tax exemption will also reduce the tax compliance burden.
A frenzy of misleading rhetoric has led many to believe they will receive a tax hike rather than tax relief under the plan. However, an analysis by the Joint Committee on Taxation found that 62 percent of taxpayers will see a tax cut of at least $100, while only 8 percent will see a tax hike, primarily among the very wealthy.
Another misconception charged by opponents is that only the wealthy benefit from this tax plan. When the wealthiest 10 percent of Americans pay more than 70 percent of all income taxes, virtually any tax cut will inevitably return more money to them. Nevertheless, the tax plan actually gives wealthier Americans a smaller share of the tax cuts relative to their current tax burden. In truth, the legislation makes the tax code more progressive than it already is.
Floridians work hard for their money, and they deserve to keep more of it. This bill allows that to happen, while also improving job opportunities and wages, and reducing the difficulty of filing taxes. Is this the perfect piece of legislation? No, but in our current politically divided climate it is a tremendous step in the right direction.
Closing special interest loopholes, limiting distortions such as the SALT deduction (which forces Floridians to subsidize high-tax states like Illinois and New York) bring us much closer to a truly fair tax system for all. It is our sincere hope that Florida’s elected representatives will get behind the package and ensure that Floridians are able to reap the benefits.
Sal Nuzzo is vice president of policy and director of the Center for Economic Prosperity at the James Madison Institute. Brandon Arnold is executive vice president of the National Taxpayers Union.