A tax code for the middle class – let’s invest in the American dream

A tax code for the middle class – let’s invest in the American dream
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It doesn’t take an expert to see that something is stalling the American economy. 

2016 was the 11th straight year that America failed to achieve 3 percent annual growth, which was our average nearly every year since 1960. I’ve heard numerous pundits act like returning to 3 percent growth is something special. No, it’s just “average.” The American people deserve better than just average growth.

But even average growth is optimistic if we keep hamstringing our job creators. Our 40 percent corporate tax rate and broken tax code are chasing our ideas, our jobs, and our investors into the open, waiting arms of foreign countries. We are keeping wages and productivity low. We are crippling our small businesses. 

Changes have to be made to unshackle our small businesses, but in the process, we can’t forget about the primary vehicle for economic growth: the middle-class.

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I’ve said it before: What we have right now in America is too many undeserving people at the top getting bailouts and too many undeserving people at the bottom getting handouts. And you know who’s been stuck with the bill? Middle-class families. And they can’t afford it any more. Their kids’ tuition has gone up, their health insurance has gone up, but you know what hasn’t gone up? Their take home pay.

 

That’s why I’m speaking up for the middle class. Someone has to speak up for ordinary people when it comes to tax reform.

Middle-class families drive our economic engine. They buy the goods and services that our businesses are selling. They work hard to be able to spend and save and invest. They are our entrepreneurs and our innovators. And now, as they are trying to balance their checkbooks, nearly one-third of their income is automatically withheld and sent off to Washington.

Right now, if you’re a middle-class family in Alexandria, La., with a combined household income of $59,000 and two kids, and you claim all your exemptions and take the standard deduction, you’re still going to be sending the federal government $3,500. Now, that’s not even counting contributions to state and local taxes, or payments to Social Security and Medicare. By the time the bills are paid and there’s gas in the car, very little is left for the kids’ college funds.

I have a plan for how tax reform can target the middle class and bring those families some badly needed relief.

Nearly three-quarters of Americans opt to take the standard deduction when filing their taxes. It’s simple, it’s fair, and it requires less documentation than itemizing. All Congress needs to do is to double the standard deduction across the board in order to inject more than $600 billion back into the economy over 10 years, according to a 2014 CRS report. That’s an immediate shot in the arm for the American economy. That family of four in Alexandria will have their tax bill reduced to $1,700, freeing up almost $2,000 of hard-earned income.

That’s $2,000 new dollars back into my state’s economy. As the cost of earning more is reduced, people will want to work harder. That means more productivity and even more growth. It’s Economics 101: You give people more to spend and they’ll spend it, and grow the economy in the process.

We need to liberate the middle class and their power to spend and save. In short, we need to renew the belief in the American dream.

A tax reform policy that provides relief to the middle class, such as doubling the standard deduction, will reawaken the incentive to work, save, and invest. Our economic fate is tied to the health of our middle class and our small businesses. It’s high time that we offer middle-class Americans a tax code that believes in them.

Kennedy is the junior senator from Louisiana.