Republicans have rewritten tax law for the first time in three decades and U.S. Rep. Greg Walden, R-Ore., expects the $1.5 trillion in cuts to create jobs and make the U.S. more competitive world wide.
“We think giving Americans more of the money they have earned is a better use of the money and grows the economy,” he said.
Within hours after President Donald Trump signed the tax reform package into law on Dec. 22, AT&T, Comcast, Wells Fargo, Boeing and other large corporations announced they were giving sizeable bonuses to workers.
The stock market also rose on the optimism of investors who want to spur business growth, said Walden.
He expects the good news to continue out of the belief that cutting the corporate tax rate from 35 percent to 21 percent, starting in 2018, will bring the U.S. rate closer to those of competitor nations.
He said small businesses, which provide jobs for more than 50 percent of the workforce, will also receive hundreds of billions in tax cuts.
The new rates, when coupled with Trump’s rollback of regulations, is likely to cover the $1.5 trillion that is forecast to be added to the deficit over 10 years by the tax cuts, said Walden.
“I don’t anticipate it to have a negative impact,” he said.
However, he also believes Republicans still need to cut government spending to pare down the deficit that reached more than $20 trillion under former President Barack Obama’s watch.
Walden said more than 100 economists are onboard with the new tax law they believe it will stimulate growth.
“I want to thank the nearly 2,000 Oregonians who called and wrote to me over the last month with suggestions on how we could improve the Tax Cuts and Jobs Act to better fit our needs in Oregon,” he said after the final House vote.
“This measure means a hardworking family of four in eastern Oregon that earns about $50,000 a year — which is the median household income in my district — will receive a tax break of about $1,300 compared to the existing law.
“Instead of a bloated federal government taking and spending your money, I want families to keep more of what they earn. That’s $10,400 in lower federal income taxes over the next eight years for that one family.”
Walden earned praise from the Oregon Farm Bureau last week for tax reform that Barry Bushue, president of the organization, said will simplify rate structures. He said the death tax will also be eliminated for estates under $11 million, while maintaining an annual indexing for inflation, which covers nearly all family ag operations.
Bushue said the new law preserves important tools, such as cash accounting, stepped-up basis, deductions for business interest and carry forward of net operating losses, among other benefits.
Farmers and ranchers will now be able to write off costs of qualifying purchases up to $1 million for small business (up from $500,000). The bill also allows use of Section 179 bonus deprecation for qualifying used equipment, not just new, said Walden.
“This was a huge fit and we know family agriculture will see the benefits for many years to come,” said Bushue.
Although many of the cuts are business-oriented to boost the economy, Walden said the middle class will benefit from increased employment, higher wages and other opportunities.
Last week, he held a teleconference with reporters from his Second Congressional District, which includes Wasco and Hood River counties, and said Oregonians will realize these benefits:
• Doubled Standard Deduction: 224,588 (68 percent) taxpayers in the district take the standard deduction under current law. By doubling the standard deduction, these taxpayers will see an immediate tax break.
• Increased Child Tax Credit: 50,193 taxpayers in the district claim the child tax credit. The law doubles the child tax credit from $1,000 per child to $2,000.
• Tax Relief for Small Businesses: 50,650 taxpayers in the district have small business income. The new law reduces taxes for small business owners by providing a 20 percent tax deduction on the first $315,000 of income.
• Simpler Taxes: 104,189 taxpayers in the district itemize their taxes. As a result of the near doubling of the standard deduction and other simplifications, many taxpayers will have much simpler returns.
It is estimated that nine out of 10 Americans will be able to file their taxes on a postcard.
Walden worked with members of the conference committee to reconcile the House and Senate versions of the tax bill. He told reporters Dec. 19 that he had pushed to retain local tax deductions and other provisions of the tax code that many Oregonians favored.
As a result of negotiations, he said taxpayers can deduct up to $10,000 in a combination of local property taxes and state income taxes from their federal taxes.
Walden said these deductions are important to Oregonians because the state has an unusually high income tax to compensate for the lack of a state sales tax.
“Oregon has one of the highest tax rates in the country,” he said.
Previous law capped property tax deductions at $1 million. There were no caps on state/local income tax deduction.
Mortgage interest deduction is now capped at $750,000, down from $1 million under current law, said Walden.
He said the student loan interest deduction is preserved and Americans can deduct medical expenses not covered by insurance that exceed 10 percent of adjusted gross income.
The Republican plan was unilaterally opposed by Democrats.
U.S. Sens. Ron Wyden and Jeff Merkley, both from Oregon, joined their Democratic colleagues in calling the reform a “disastrous plan to give tax breaks to millionaires and wealthy corporations.”
“Americans are learning how many tax promises Republicans are willing to break, how many cons they’re willing to run, how many hardworking families they’re willing to betray to guarantee handouts to powerful CEOs and campaign donors,” said Wyden after the Senate vote in early December.
He described the tax plan as a “backdoor deal that digs into the pockets of the middle class to pay for massive tax breaks for multinational corporations.”
Merkley accused GOP leaders of “pulling off the biggest bank heist in history.”
“And they’re delivering the loot — more than a trillion dollars out of our national treasury — to the wealthiest Americans and biggest corporations,” he said.
“This is government by and for the powerful instead of government by and for the people. It is the culmination of elections corrupted by dark money from the Koch Cartel.”
“This tax scam so favors the wealthy that 83 percent of the benefits go to the richest 1 percent. It sends jobs overseas. It increases our national debt. It destroys health care for 13 million Americans while raising the cost of health insurance for millions more.”
Justin Discigil, communications director for Walden, said repeal of the Obamacare mandate, a part of the tax package, allows Americans to exercise personal choice about signing up for coverage or not.
The mandate required most Americans to sign up for coverage or pay a penalty.
“It provides families with much-needed relief and flexibility to buy the health care that’s right for them if they choose,” said Discigil.
The Washington Post issued a fact checking report about the 13 million figure referenced by Merkley and other Democrats. That number comes from a Congressional Budget Office estimate on the impact of repealing the mandate.
The CBO estimated that, in 2019, one million fewer people would be on Medicaid and three million fewer people than currently estimated would be participating in the Obamacare exchanges.
By 2025, there would be five million fewer people on Medicaid, five million fewer people in the exchanges and three million fewer people getting health insurance coverage from their employers.
That adds up to 13 million, but CBO says the action would be voluntary.
In other words, people would not be forced to give up their insurance, reported the Post.
“These reforms will provide real tax relief for hardworking, middle-class families in Oregon and allow them to keep more of what they have earned. That has been Rep. Walden's goal and focus from the outset,” said Discigil.