Those in favor of the changes hope that this will bring more capital back to American businesses to stimulate the American economy and job growth.
The Tax Cuts and Jobs Act passed just before the start of 2018 is already showing increased benefits for working Americans just two months later.
As the tax reform plan predicted, American companies are bringing business back to the United States. The White House shared that February data showed that “more than 350 companies have made these intentions public, announcing over $150 billion in intended investments at home, and $4.2 billion in bonuses paid to more than 4 million U.S. workers.”
Many companies intend to raise both wages and bonuses for their employees. The Council of Economic Advisers provided data in an October 2017 report that estimates annual increases up to $4000 per household. They can link these increases directly to the tax reform that was passed later that year.
In the same report, slow growth in previous years was found to be the result of a lack of capital spending on the part of companies. President Trump made this the focus of tax reform legislation.
Tax changes in 2018
“The Tax Cuts and Jobs Act makes our tax rates more in line with the rest of the developed world, representing pro-growth reforms and putting American businesses on a level playing field with foreign competitors,” the White House stated.
The Tax Cuts and Jobs Act made a number of changes to the tax law, to begin in calendar year 2018. Tax season of early 2018 is still under the old tax code, as the new tax reform law did not take effect until January 2018, after the reporting period for the current filing tax year.
The impact of the new tax law on individuals means that the standard deduction, one that many Americans take in lieu of itemized, specific deductions, will double. According to TurboTax, the leading tax preparation software, this means that the number of Americans who list their deductions in an itemized list is expected to decrease next tax season.
The Child Tax Credit, offered to those with children, also doubled. A credit for dependents other than children was also added.
4.2 million hard working Americans have already received a large Bonus and/or Pay Increase because of our recently Passed Tax Cut & Jobs Bill….and it will only get better! We are far ahead of schedule.
— Donald J. Trump (@realDonaldTrump) February 11, 2018
The new tax code eliminates many deductible expenses, drawing criticism from many Americans who saw these changes as an attack on individual spending and organizations. For example, many teachers were outspoken about the elimination of the previous tax benefits for teachers, many of whom spend their own money to provide materials for their classrooms.
The legislation had a number of notable tax changes for businesses. The corporate rate was dramatically decreased. Those in favor of the changes hope that this will bring more capital back to American businesses to stimulate the American economy and job growth.
Small businesses as well as larger corporations are poised to benefit from the tax changes beginning in 2018.
The future of the American worker
It seems that these changes are having the desired effect. “The Tax Cuts and Jobs Act makes our tax rates more in line with the rest of the developed world, representing pro-growth reforms and putting American businesses on a level playing field with foreign competitors,” the White House stated.
The amount of capital investments intended by the more than 350 companies included in the announcement represents “more than 7 percent of all private non-residential investment in 2017.” This is expected to provide increased funds available to pass on to American workers in the form of higher pay.
Utility companies are also benefitting from the tax changes. Many, including electric and gas companies, announced that they intend to reduce their rates as well. This means additional savings to American families from energy costs.
