Americans will file their taxes under the 1980s era tax code for the last time this week. Under the new code, taxpayers will experience a simpler code and will see more take-home pay.
Compared to the old code, a family of four earning the annual median income of $73,000 will see a tax cut of more than $2,000 for tax year 2018, while, a single parent with one child earning $41,000 per year will see a 73 percent tax cut, resulting in $1,304 in increased take-home pay.
{mosads}Under the new system, more than 93 percent of taxpayers will now take the standard deduction, leading to drastic tax simplification. The 105 million taxpayers that already take the standard deduction will also see drastic tax relief, with the provision doubling from $12,000 to $24,000 for families.
The threshold for the Alternative Minimum Tax is lifted for those making a million dollars, offering relief for many of the 4.5 million Americans that paid this tax in 2015 and millions more that were forced to calculate their AMT even though they didn’t pay anything extra.
With the child tax credit doubling from $1,000 to $2,000, the 22 million families that take this credit will see strong tax relief.
While these benefits are significant, the Republican tax plan is already a win for middle class families and businesses across the country.
Ninety percent of wage earners have already seen more money in their paychecks, while at least 500 businesses have announced pay raises, employee bonuses, utility rate cuts, 401(k) increases and other benefits because of tax reform.
AT&T has given 200,000 U.S. employees a $1,000 bonus, Pfizer has announced $100 million in bonuses to non-executive employees, and Express Scripts has given its 26,000 employees bonuses averaging $1,200.
The success of tax reform is also being felt by small businesses across the country. Wichita Railway Services LLC has given its five employees bonuses of between $3,000 and $6,000 while Anfinson Farm Store, a family owned business in Cushing, Iowa (population 223) has given its employees a $1,000 bonus and raised wages by five percent.
The Hammock Source — a Greenville, N.C. based company with 260 employees — has given its employees $1,000 bonuses, and Five Senses Spa, Salon and Barbershop based in Peoria, Illinois has given $500 bonuses to its 20 employees.
Other companies have chosen to increase hourly wages for their workers with SunTrust Bank and Charter Communications setting their base employee wages to $15 per hour.
These bonuses and pay increases are just one of the many benefits of tax reform.
Utility companies across the country have reduced their rates resulting in almost $4.5 billion in savings for more than 91 million consumers.
Other companies are increasing retirement benefits for their employees through increased 401(k) matches. For instance, Cigna has pledged to spend $30 million on 401(k) matches, while Delaware-based Mountaire Corporation has announced it will match 100 percent of the first 3 percent employees invest, and 50 percent of the next 2 percent invested.
Businesses are also increasing the amount they invest in equipment and factories, and in employee benefit programs.
Since tax reform passed, Merck has announced it will invest $12 billion in the economy, Exxon Mobil has announced it will invest $35 billion in the next five years, and Amgen has pledged to increase capital expenditures by $3.5 billion and invest $300 million in a new manufacturing plant.
Similarly, Walmart has announced an expansion of maternity and parental leave and a $5,000 allowance for adoption expenses, while Boeing has pledged to spend $300 million equally divided on charitable donations, workforce development, and infrastructure
Even stock buybacks and dividend payments are a sign that tax reform is working, despite the criticisms of the left. Both buybacks and dividends contribute to a stronger stock market, which in turn increases the wealth of more than 28 million taxpayers and strengthens the retirement security of the 55 million Americans that own a retirement account or 401(k).
Tax reform is working. The law has already resulted in at least 500 companies giving out pay raises, bonuses, and other employee benefits, has increased take-home pay for 90 percent of Americans, and has encouraged increased investment in the economy.
In addition to these benefits, taxpayers can now say goodbye to the old code. Next tax season, Americans will see increased take-home pay, and be faced with a simpler, less burdensome tax code.
Alex Hendrie is director of tax policy at Americans for Tax Reform (@TaxReformer).