Although the Tax Cuts and Jobs Act (TCJA) doesn’t affect tax returns filed for 2017 (due this week), Americans already have a lot to celebrate about the new tax law. Independent Women’s Voice asked women to share on social media how tax reform had affected them, and many women did. Their stories ought to be told.
First, there were the increased paychecks for people like Rebecca, Brianna, Laura, and Debra. Rebecca told us she had reservations about President Trump, but was nevertheless excited that tax reform will benefit her family “significantly.” Brianna said she’s getting $234 more in each paycheck, for a total of $2,808 per year. Debra told us she’s keeping $300 more of her money each paycheck, for a total of $3,600 per year. Laura estimates her annual savings to be $4,500!
Several parents tweeted how they planned to spend these new resources on their children: new basketball shoes, ballet lessons, healthier food, new appliances, and defraying the cost of medical bills, car payments, gasoline, and daycare. One mom even tweeted she could now afford airfare to visit her 20-year-old son, who is stationed in a faraway state with the U.S. Army.
Why did so many American workers see a boost to their paychecks? The Tax Cuts and Job Act cut tax rates for every income bracket. Before the TCJA, Americans filed in one of seven tax rates of 10, 15, 25, 28, 33, 35, and 39.6 percent. Now the seven income tax rates have been lowered to 10, 12, 22, 24, 32, 35 and 37 percent, respectively. The law also adjusts the income thresholds for each bracket, resulting in lower income tax liabilities for people at nearly every income level.
Secondly, we heard a lot about bonuses, a result of the corporate tax cut. Just ask Ann, SA, or Audrey: Ann is a single mom. SA is also a mom, who plans to use her $1,000 bonus as a re-enrollment deposit for her daughter’s school, where she can continue to overcome dyscalculia and dyslexia. Audrey says her bonus comes in addition to a raise, increased 401K matching, and a lower tax rate paycheck to paycheck.
These aren’t cherry-picked stories, and they reflect a huge trend: More than 500 employers have offered bonuses to 4 million American workers as a direct result of tax reform. The federal corporate rate has been slashed from 35 percent (the highest in the world) to 21 percent, allowing corporations to share massive new resources with their workforce and reinvest in their strength and growth.
Even on top of all this good news, there are some benefits of tax reform that women and their families may not fully enjoy until about a year from now, when 2018 tax returns are due. For one: Although the TCJA eliminates personal exemptions, it doubles the standard deduction.
This change will have two effects: This will make filing taxes simpler for filers who will change from itemized deductions to the standard deduction. And it will shield more income from taxation by reducing taxable income for many filers.
The Child Tax Credit will also double from $1,000 to $2,000 per child, $1,400 of which is refundable. There’s a new $500 credit available as well for non-child dependents, which is likely to help the parents of many college-aged children. Many families who own and operate small businesses (as “pass-through” entities, where income passes through to them as individuals) will be able to deduct 20 percent of their qualified business income.
Putting all this money back into the hands of American families won’t just improve lives in the short run. Sure, it’s great to be able to go on vacation or purchase a new refrigerator. But many of the downstream effects of the new tax law will have long-term effects: Analysts estimate it will lead to the creation of 339,000 more jobs, and 1.5 percent higher wages.
This means more Americans—both men and women—will have more opportunities to save, invest, and improve their financial security. That’s something to celebrate as we file our taxes this year.