There's No Time Like the Present for Tax Reform 2.0
This summer, youth employment reached its highest rate since 1966, according to the U.S. Bureau of Labor Statistics.
This summer, youth employment reached its highest rate since 1966, according to the U.S. Bureau of Labor Statistics. Nearly 55 percent of all individuals between the ages of 16 and 24 had a summer job, according to BLS.
As summertime temperatures have risen, so has the U.S. economy: Consumer demand for goods and services is surging and average wages have risen by about 2.7 percent over the past year.
More than seven months after the enactment of the Tax Cuts and Jobs Act – the Republican tax reform bill -- the benefits of reducing taxes for Americans and businesses are clearly visible. Employment rates, nearly across the board, are up, average wages are on the rise, and more Americans are taking advantage of the economic boom to leap into higher-paying positions at other businesses. In fact, according to U.S. Department of Labor data published in July, the number of Americans quitting their jobs for higher-paying positions elsewhere hit a record high. More than 3.56 million workers, about 2.4 percent of all employed individuals, quit their jobs in May, setting a 17-year record.
While much improvement has been made thus far in 2018, Congress can do even more to ensure the hot streak continues for hard-working Americans.
First, Congress should make permanent the lower personal income tax rates put into law by the tax bill. Under current law, the personal income rates sunset in 2025. There’s no time like the present for lawmakers to deliver on the promises they’ve made to the people and implement long-lasting tax reform. Every day Congress dithers on cementing the personal income tax rates is another day hard-working Americans have to be concerned about whether their tax rates will someday revert to pre-2018 levels.
In addition to permanently reducing personal income tax rates, Congress ought to expand reforms on the overly complicated “expensing” process. Prior to the passage of the tax bill, business owners could not fully deduct the cost of capital investments from their taxable income immediately. Forcing business owners to incrementally deduct the cost of business expenses resulted in reduced business investment and worker pay.
The bill allows business owners to immediately “write off” capital investments. However, the full range of possible benefits from expensing is not being utilized. The cost of quickly depreciating assets may be deducted, but slowly depreciating assets are still subject to the antiquated delayed-expensing system. By increasing the scope of expensing reforms to cover all investments, Congress could reduce the opportunity cost paid by business owners and increase business investment, thereby incentivizing business growth and profitability.
Although “tax reform 1.0” was a great start, Congress should make the beneficial tax policies enacted in 2017 permanent, and it should also build on those reforms to keep the good times rolling.
[Originally Published at the Washington Examiner]