Dems miss forest for trees: GOP tax plan will help working families

Tax reform is getting the much-needed spotlight in Washington. Republicans recently released a unified tax reform framework that identifies several areas of consensus for conservatives.

The tax reform framework put forward by the “Big Six” — National Economic Council Director Gary Cohn, Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell (R-Ky.), Speaker Paul Ryan (R-Wis.), Senate Finance Committee Chair Orrin Hatch (R-Utah) and House Ways and Means Chair Kevin Brady (R-Texas) — will promote job creation, higher wages and economic growth.

{mosads}One of the most significant changes in the unified framework is reducing the number of income tax brackets — a significant simplification that would make tax compliance easier and more affordable. The plan calls for collapsing the current seven tax brackets into three: 12 percent, 25 percent and 35 percent.

In their partisan search for reasons to oppose the framework, Democrats in Washington have set their sights on a single number, the lowest marginal income tax rate on individuals. They point to the elimination of the 10-percent rate and the creation of a new 12-percent rate and misconstrue this as a tax hike, a lazy analysis that misses the forest for the trees.  

In reality, the plan doesn’t increase the 10-percent bracket — it effectively eliminates it. Combined with doubling the standard deduction, reducing the number of income tax brackets will provide significant savings to families who are currently in the 10-percent bracket.

Under the plan, the first $12,000 earned by an individual and $24,000 earned by a married couple will be entirely exempt from income taxes. Essentially, the 0-percent tax bracket gets bigger, the 10-percent bracket goes away and the 15-percent rate falls to 12 percent. 

The framework includes several additional provisions that would help everyday families, such as protecting benefits to encourage work, higher education and retirement savings. Another is repealing the death tax, whose burden falls much further down the income spectrum.

Too often, families are forced to sell off assets or close their business entirely because they do not have enough cash on hand to pay the government nearly half of their estate when they die. 

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Combined, these tax reform details will add up to more money in Americans’ pockets. As National Economic Council Director Gary Cohn said at a recent White House press briefing, “Based on our assumptions, a typical family earning $100,000 with two children who uses the standard deduction and continues to use the standard deduction, they can expect a tax cut of about $1,000.”

Writing recently in Forbes, Ryan Ellis of the Family Business Coalition ran a tax return for three median income Americans, with similar results. Even using the unrealistically-low assumptions in the debunked “study” from the Tax Policy Center, Ellis found that a median income married couple with two small children would see a $1,223 tax cut under the GOP framework.

A median-income single mother with two small children would see a $498 cut; and a median-income single woman would get a $494 cut. These numbers would likely be higher in practice or under dynamic scoring.

Releasing this unified framework was a critical first step toward pro-growth, comprehensive tax reform. Passing budget resolution with reconciliation instructions that pave the way for tax reform is the second.

Processing these framework details in the Senate Finance Committee and House Ways and Means Committee through an open, transparent process should swiftly follow. Thankfully, tax writers in Congress signal strong support for turning the framework into legislative text using a regular, open committee process. 

Americans at the grassroots level are understandably frustrated with the rigged system that favors politically connected special interests at their expense. That’s why it’s so encouraging to see the fierce commitment among Republican leaders in Washington to get tax reform done.

Challenges lie ahead, but it’s important for policymakers to remain focused on the need to bring tax relief for American families and businesses across the country. 

Christine Harbin is vice president of external affairs for Americans for Prosperity, a political advocacy group founded by Charles and David H. Koch that is a proponent of lower taxes and less government regulation.