By Peter Roskam
For too many years Americans have endured a broken tax code that punishes hardworking taxpayers. Over the years, special interest groups and lobbyists have used their influence to manipulate our tax system into something that is too costly, too complex and unfair to the vast majority of American taxpayers.
We don't have to live like this. We can transform our tax code into something that works for more Americans; something that respects and rewards hard work; and something that Americans deserve.
When individuals file their taxes every year, they can opt for one of two types of deductions. The majority of Americans--and 49 percent of constituents in the 6th Congressional District, which I represent--take the standard deduction. The remaining taxpayers take itemized deductions.
The Tax Cuts and Jobs Act proposes a dramatic increase in the standard deduction to $24,000 for a family, doubling the current standard deduction. Because taxpayers choose between standard and itemized deductions, we expect a significant shift from the 49 percent of people who currently itemize to the standard deduction, since it would maximize their deduction. This means that the more moderate-income taxpayers who currently itemize would see a sizable decrease in their tax bill using the standard deduction.
Some have said that this plan would eviscerate the state and local tax deduction. This is simply not true. For Americans who choose to itemize, mortgage interest, property tax deductions and charitable contribution deductions are still available to them. This bill maintains the property tax deduction (up to $10,000), the mortgage interest deduction (for a loan up to $500,000) and the charitable deduction. The average family of four in the 6th district--which encompasses DuPage County as well as parts of suburban Cook, Kane and Lake counties--makes $135,000 and, taking advantage of the child tax credit, could save over $5,000 annually on their itemized federal income tax.
Probably the most egregious and unfair tax affecting over 30,000 of my constituents is the Alternative Minimum Tax, which limits their ability to take advantage of deductions because of an outdated policy that hits the middle class. We're eliminating taxes like the Alternative Minimum Tax that punish the success of hardworking families.
Currently in my district, the average taxpayer making less than $200,000 annually using the property tax itemized deduction does not deduct more than $10,000 in property taxes; 89 percent of the total number of returns filed in 2014 had less than $200,000 annual income. That 89 percent would see the largest tax relief as a percentage of their tax bill.
However, it's not just middle class Americans that would see tax relief; Americans at every income level would receive tax relief under this bill, and individual tax rates are part of that equation. Testimony by the nonpartisan Joint Committee on Taxation reaffirms that this tax bill provides tax relief at every bracket.
Everyone would benefit from the decrease in the marginal tax rates. Tax brackets under this plan would drop the lowest tax bracket to zero; the remaining four federal income tax brackets would be 12 percent, 25 percent, 35 percent and 39.6 percent. For example, a family making $90,000 or less would fall into the 12 percent tax bracket and a family making $90,001 to $260,000 would fall into the 25 percent tax bracket for income earned above $90,000. Many hardworking small business owners would also see a benefit through the reduced rate on pass-through business income.
The Tax Cuts and Jobs Act is good legislation. It respects and rewards hard work by allowing taxpayers to keep more of the money they earn in their paychecks. We are fighting for hardworking taxpayers and a healthy economy so that we can grow our economy and allow America to compete and win. Under this tax plan, everyone benefits and everyone has the same opportunities.
Peter Roskam, R-Wheaton, is the U.S. Representative for Illinois' 6th District and chairman of the House Tax Policy Committee.