Americans are still paying too much for groceries, housing, energy, and other everyday needs. AFP helped pass the Working Families Tax Cuts, but passing one tax bill wasn’t going to change that overnight.
So, does that mean the Working Families Tax Cuts aren’t working?
Kent Strang, managing director for Americans for Prosperity, recently tackled that question in an op-ed, published earlier this year in the Latrobe Bulletin.
His point is simple: Judge the tax cuts by what they were designed to do.
That means looking at whether families are keeping more of their paychecks and businesses have more freedom to invest and grow.
By those measures, the law is doing what it was designed to do.
Families avoided a major tax increase
Let’s start with what would’ve happened without the Working Families Tax Cuts.
Key parts of the 2017 tax cuts were set to expire. If Congress had allowed that to happen, taxes would’ve gone up for millions of Americans.
For a typical family of four earning about $75,000, that could’ve meant roughly $1,500 more in federal taxes each year.
Instead, the U.S. Congress made those tax cuts permanent.
Washington can’t cut all monthly costs overnight. And estimates show that the typical taxpayer is actually paying nearly $2,300 less in federal taxes this year because of the law.
That’s money people can keep in their families and communities, instead of sending to Washington.
Small businesses have more reason to invest
The Working Families Tax Cuts also changed the incentives businesses consider when deciding whether to make their next investment.
The law restored full expensing for equipment and domestic research and development. In simple terms, businesses can deduct those investments right away rather than spread the deduction over several years.
Imagine a business owner who needs new equipment to increase production but also wants to hire a couple of new employees. By allowing the owner to deduct the cost of new equipment right away, full expensing can make it easier to both expand production and hire more workers.
Our tax code shouldn’t make it harder to invest in something that could help a business grow and better serve its community. When that barrier is lowered, owners have more room to buy equipment, develop new ideas, expand, and create jobs.
That’s how tax policy can help communities thrive.
Economic growth matters when it comes to lowering costs
Keeping taxes lower is only one part of economic prosperity.
That’s why Strang also points to the law’s longer-term effects.
The Congressional Budget Office has projected stronger economic growth as a result of the law. Policies such as full expensing for investments can help because they incentivize business owners to expand into promising industries.
Productivity investment is crucial.
A new machine can help a worker produce more in an hour. New technology can help a small business serve more customers. A new location can create opportunities and employ more people.
The more room businesses have to invest and grow, the more opportunities they can create for workers and communities.
There’s still plenty left to fix
Americans still face high housing costs. Groceries remain expensive, health care costs too much, and energy bills are straining family budgets.
Those problems deserve their own policy solutions.
But reversing tax cuts and taking more money from families wouldn’t make groceries cheaper or finance the building of another home. Neither would increasing barriers to business investment and growth.
Bottom line: We shouldn’t judge one tax law by whether it fixed every problem in the economy. We should judge it by what it was designed to do. And by that standard, the Working Families Tax Cuts are delivering.
There’s more work to do on bringing costs down. But letting families keep more of their money and giving businesses more room to grow is a good place to start.
Read Kent Strang’s full op-ed to learn more about why the Working Families Tax Cuts should be judged by what they were actually designed to accomplish.