The Tax Cuts and Jobs Act
On December 20, Congress passed the first major overhaul of the tax code in more than 30 years, the Tax Cuts and Jobs Act, which will deliver historic tax relief for workers, families and job creators in Michigan.
Our tax code is broken and doesn’t work for families who are struggling to make ends meet. The Tax Cuts and Jobs Act will allow people to keep more of their hard-earned money while advancing economic growth and opportunity.
Since the tax cut law was enacted, the positive benefits have been resonating across the country. As a result of the law, we've seen reports of more than 400 businesses hiring, increasing wages, and offering bonuses and other benefits like paid leave and enhanced 401(k)’s to their employees. Click here to watch my remarks on the House floor and read below for additional details on how this law will provide the American people with a tax cut and the tax code they need and deserve.
Check Your Paycheck
Federal tax withholding is how much of your pay the federal government takes from every paycheck. Under the Tax Cuts and Jobs Act, the federal government will take less because the law lowers tax rates for Americans of all income levels and nearly doubles the standard deduction.
1. Net Pay: This is the total amount of money you keep from every paycheck after federal income taxes and other deductions. With the Tax Cuts and Jobs Act, this number will be larger due to the lower tax rates and significantly larger standard deduction.
2. Federal Tax Withholding: This is the amount of your pay the federal government takes from every paycheck for income taxes. With the Tax Cuts and Jobs Act, this number will go down in comparison to your old pay stubs.
Highlights of the Tax Cuts and Jobs Act
- Lowers individual tax rates across the board so people can keep more of their hard-earned money.
- Doubles the standard deduction so more income will be protected from taxation—from $6,500 to $13,000 for individuals and from $12,000 to $24,000 for married couples.
- Expands the Child Tax Credit from $1,000 to $2,000 for single filers and married couples to help parents with the cost of raising children.
- Improves savings vehicles for education by allowing families to use 529 accounts to save for elementary, secondary and higher education.
- Lowers the corporate tax rate to 21% – down from 35%, which today is the highest in the industrialized world.
- Delivers significant tax relief to Main Street job creators by offering a first-ever 20% tax deduction that applies to the first $315,000 of joint income.
- Allows businesses to immediately write off the full cost of new equipment to improve operations and enhance the skills of their workers – unleashing growth of jobs, productivity, and paychecks.
Myth vs. Fact: The Tax Cuts and Jobs Act
During the consideration of tax reform, proponents of the status quo made a number of misleading claims about how the Tax Cuts and Jobs Act would harm the American people. In addition to delivering tax relief for middle-income families and empowering our businesses to grow the economy, H.R. 1 preserves a number of important provisions and programs as outlined below:
CLAIM: “This bill is only a tax cut for the wealthy.”
FACT: The bill cuts taxes and lowers rates for all Americans. While the status quo tilts in favor of the wealthy, the Tax Cuts and Jobs Act delivers tax relief for middle-income Americans by doubling the standard deduction and lowering rates for those who need it most. The typical American household will receive a tax cut of $2,059, meaning more hardworking Americans will keep more of their paycheck.
An independent fact-checker recently debunked this false claim and rated it with "Four Pinocchio's." You may read their analysis here.
CLAIM: “Seniors and retirees will be harmed by the legislation and cuts from Social Security, Medicare, and Medicaid.”
FACT: The tax plan does not cut a single penny from Social Security, Medicare, or Medicaid. These important programs are preserved and the legislation also retains popular retirement savings options such as 401(k)s and Individual Retirement Accounts (IRAs) so Americans can continue to save for their future. Additionally, for individuals with costly medical bills, the bill provides additional relief by expanding the medical expense deduction for 2017 and 2018 for expenses exceeding 7.5 percent of adjusted gross income, rising to 10 percent beginning in 2019.
CLAIM: “The bill is too expensive and adds trillions to our deficit”
FACT: We need a growing economy to fully address our nation's fiscal problems. The wage increases, jobs created, and overall economic growth that will result from the most historic tax reform in decades will produce substantial revenues while allowing Americans to keep more of what they earn.
CLAIM: “Critical education tax benefits are eliminated under the bill.”
FACT: The Tax Cuts and Jobs Act actually makes it easier for families to afford the costs of education. It maintains support for graduate students by continuing to exempt the value of reduced tuition from taxes while continuing the deduction of up to $2,500 on student loan borrowing. It also keeps the $250 tax deduction that teachers can use for classroom supplies while improving existing savings vehicles for education by allowing families to use 529 accounts to save for elementary, secondary and higher education.
CLAIM: “The bill eliminates important homeowner deductions and will make it harder for Americans to buy a home.”
FACT: H.R. 1 preserves the mortgage interest deduction – providing tax relief to current and aspiring homeowners. It also continues to allow people to write off the cost of state and local taxes – up to $10,000. Larger paychecks and a stronger economy will help more Americans achieve the dream of homeownership.
CLAIM: “Charitable donations will decrease because fewer taxpayers will itemize.”
FACT: The Tax Cut and Jobs Act continues and expands the deduction for charitable contributions so people can continue to donate to their local church, charity, or community organization. Additionally, the legislation will spur greater economic growth that will enable Americans to donate more of their hard-earned money to the causes they believe in.
CLAIM: “The Tax Cuts and Jobs Act” was negotiated in secret voted on without debate.”
FACT: Since January 2011, the House has held over 40 hearings on nearly every aspect of the tax code. The House Ways and Means Committee considered the bill through regular order over four days, considering amendments offered from both sides of the aisle. You can watch the hearings on C-SPAN here.
News and Opinion
- Detroit News op-ed | Bonuses are not Armaggedon
- Adrian Daily Telegram op-ed | Tax cuts and bigger paychecks ahead for the New Year
- Adrian Daily Telegram | Walberg talks financial benefits program with Adrian Lowe’s employees