Time to pass tax reform 2.0

Time to pass tax reform 2.0
© Greg Nash

Following passage of the Tax Cuts and Jobs Act (TCJA) last year, Republicans in Congress and President TrumpDonald John TrumpActivists highlight Trump ties to foreign autocrats in hotel light display Jose Canseco pitches Trump for chief of staff: ‘Worried about you looking more like a Twinkie everyday’ Dershowitz: Mueller's report will contain 'sins' but no 'impeachable offense' MORE have vowed to continue updating the tax code to further promote economic growth, maintain American competitiveness, and strengthen middle class tax reduction.

The House will take the first step in fulfilling this promise by taking up a package of legislation this week known as “Tax Reform 2.0.” This legislation, proposed by Ways and Means Chairman Kevin BradyKevin Patrick BradyHouse Democrats poised to set a dangerous precedent with president’s tax returns IRS issues guidance aimed at limiting impact of tax on nonprofits' parking expenses On The Money: New director takes helm at troubled consumer agency | Trump’s economy teetering on trade tensions, volatile markets | Brexit crisis deepens | House report scolds Equifax over breach MORE (R-Texas), will begin where TCJA left off by making middle class and small business tax reduction permanent.

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Thanks to TCJA, 90 percent of wage earners are seeing higher take-home pay. A family of four earning the median annual income $73,000 per year will see a 58 percent reduction in federal taxes, while a single parent with one child earning $41,000 will see a 73 percent reduction in federal taxes.

The standard deduction was doubled from $6,000 to $12,000 ($12,000 to $24,000 for a family), which significantly reduced taxes for the 105 million families and individuals who took the deduction before TCJA. It also will lead to dramatic simplification of the code by increasing the number of taxpayers who can file on a single page from 66 percent to 93 percent.

Tax reform further simplified the code by reducing the alternative minimum tax so that 96 percent of the 4.5 million Americans no longer need to calculate under this complex provision. The bill was also pro-family as it doubled the child tax credit from $1,000 to $2,000 benefiting the 22 million families that take the credit.

Small businesses also see tax relief in the form of a 20 percent deduction for the more than 30 million pass-through entities, while family owned businesses see relief from the death tax due to the doubling of the exemption from $5.5 million to $11 million.

Unfortunately, this tax reduction could not be made permanent because of obstruction from the left and arcane Senate rules. These constraints forced lawmakers to sunset many provisions starting in 2026. Republicans have said since passage of TCJA that they want to make these provisions permanent and tax Reform 2.0 is the first step toward doing so.

Tax Reform 2.0 is more than just a sequel to the TCJA. It contains a number of important new proposals that modernize tax-advantaged savings accounts and promote entrepreneurship and innovation. Individual retirement accounts are updated so that businesses have more flexibility to fund employee plans and individuals have more flexibility to contribute. Families will be able to withdraw $7,500 from an account to pay for the expenses of childbirth or adoption.

Universal savings accounts are created allowing families to save and invest $2,500 of their own after-tax earnings. 529 education savings accounts will be expanded so families can use these funds on apprenticeship programs and to cover home schooling expenses.

Start-up businesses will also be granted important flexibility and tax reduction so they can recover of their initial expenses and bring in new investors to retain access to important tax benefits like the research and development tax credit.

While the GOP is poised to take the next step in updating the tax code, Democrats are relentlessly running on an agenda of higher taxes on the American people. Senate Democrats have already called for a one trillion dollar tax increase, while House Minority Leader Nancy PelosiNancy Patricia D'Alesandro PelosiOvernight Energy — Sponsored by the National Biodiesel Board — Oil lease sale in Alaska nets .5M | House climate panel likely won't pass bills | EPA hires new head of Chesapeake office Stephen King torches Trump over border wall: 'Do something good for once' Pelosi agrees to term limits vote; insurgency collapses MORE (D-Calif.) has called for full repeal of the GOP tax cuts.

Many on the left want to go further by imposing massive trillion dollars-a-year tax hikes as part of a plan to impose government controlled single-payer healthcare. When Bernie SandersBernard (Bernie) SandersOcasio-Cortez on call to run for president: ‘How about … no’ GOP-controlled Senate breaks with Trump on Saudi vote Amazon workers in Staten Island launching campaign to unionize MORE ran on this plan during the 2016 Presidential election, he proposed a 6.2 percent payroll tax on businesses that would increase taxes by $10 trillion over a decade and a 2.2 percent payroll tax on families and individuals totaling $2 trillion. The Sanders campaign also proposed trillion-dollar income tax, death tax, and capital gains tax increases.

The Tax Cuts and Jobs Act signed into law last year updated the tax code after three decades of the U.S. falling behind the rest of the world. This law has resulted in higher take-home pay, increases in employee benefits, and a stronger economy.

While Democrats want to erase this progress with reckless tax hikes, Republicans have pledged to continue updating the tax code and building on middle class tax reduction and pro-growth tax reform. This commitment starts with a vote on tax reform 2.0 this week.

Grover Norquist is president of Americans for Tax Reform, a free-market, taxpayer advocacy group he founded in 1986. Alex Hendrie is the organization’s director of tax policy.