The Senate recently introduced their version of tax reform, the “Tax Cuts and Jobs Act,” which is expected to give the average American family a tax cut of nearly $1,500.
The legislation represents the first serious attempt in decades to level the playing field for American job creators, by reducing the tax burden. Senate Majority Leader Mitch McConnell explained, “This is our once-in-a-generation opportunity to lower taxes and shift the economy into high gear.” He continued, “For small businesses, we want to make it easier to navigate the tax code, grow, and hire workers,” he clarified. “And for all businesses, we want to make it an easy decision for them to bring investment and jobs home and keep them here.”
On the individual side, the Senate bill also expands the zero tax bracket and maintains the 10% bracket so more low and middle income Americans can keep to themselves more of their paychecks. Top earners would have to pay a rate of 38.5% in the Senate version, which is lower than the previous 39.6% rate cited in the House version.
The bill has almost doubled the standard deduction from $6,350 to $12,000 for individuals, and from $12,700 to $24,000 for the married couples, and from $9,300 to $18,000 for single parents.
The legislation also increases the child tax credit from $1,000 to $1,600, while preserving existing child and dependent tax credits.
The bill also preserves the incredibly popular Earned Income Tax Credit (EITC) allowing individuals to deduct the medical expenses, provides relief for their education costs for graduate students, and enhances the standard deduction for the elderly and the blind.
“This will reduce uncertainty and costs for family-owned farms and businesses by making it less likely that Washington will impose an unnecessary layer of taxation on Americans who want to pass on their life’s work to the next generation,” the Senate Finance Committee had said.