The tax reform bill working its way through Washington is good for Maine families and small business. Here’s why:
First, both versions of the tax bill double the standard deduction for middle-class families. If you are a low or mid-level earner, you will benefit from significant increases to the standard deduction. Under both tax plans, this deduction would double, meaning that individuals earning $12,000 and households earning $24,000 would no longer owe taxes to the federal government.
Taxes are eliminated for Maine families at or below the poverty line.Under the current tax structure, the 12.5 percent of Maine households below the poverty level, which is $24,600 for a family of four, owe taxes on half their earnings. But no one living in poverty should have to worry about paying Uncle Sam, and with these reforms, they would no longer have to.
The middle class will see a huge tax cut. With a median household income of $53,079 in Maine, the middle class — those earning at least 67 percent of the median income — begins at just $35,562 per household. By doubling the standard deduction, households at this income level will only owe taxes on $11,562 of income; they are currently taxed on $23,562.
A bigger tax break for families with children. The proposed increases to the child tax credit will also make a big difference for Maine. Under the House plan, the child tax credit would increase from $1,000 to $1,600 and the Senate plan would double the credit to $2,000.
According to Sen. Susan Collins, “A single mom with one child earning $35,000 would receive $1,100 back from the government, rather than owing income tax, which would certainly be helpful to her in making ends meet.”
Collins single-handedly protected health care and property tax deductions. In the Senate, Collins fought hard to make the Senate bill even better, championing a measure to help Americans offset medical costs by increasing the medical deduction. She also held firm on restoring the property tax deduction for homeowners. Although neither reform was included in the original bill, it was, in her opinion, the right thing to do.
This is a big win for Maine’s small businesses. The proposed tax reforms would also greatly benefit small businesses, the backbone of Maine’s economy. Under the House plan, the top tax rate would cap at 25 percent. The Senate plan would cut rates for small “pass-through” businesses, where the earnings are filed as the owner’s income.
Since almost two-thirds of Mainers employed in the private sector work for pass-through businesses, this tax break would certainly make an impact, allowing for companies to invest more in growing their staff, infrastructure and technology.
New Balance, an American-based company that employs roughly 900 Mainers, has praised Collins’ support for these comprehensive reforms, saying in a statement that “The Senate bill will allow New Balance to be more competitive and manufacture more footwear in Maine that we can export across the globe.”
This tax bill changes the game and incentivizes businesses to bring jobs back to America. American businesses currently face a combined corporate tax rate of 39 percent, which is 16 percentage points higher than the worldwide average. This has created a perverse incentive for American businesses to move their assets overseas and create jobs elsewhere, placing a heavier burden on small businesses and American households that we can no longer afford.
Making our tax rate more competitive with the rest of the world will level the playing field for American-based companies that do business around the world, incentivizing them to bring their assets and the jobs they create back to American soil.
Under the Senate plan, the Tax Foundation estimates that GDP would increase by 3.7 percent, increase wages by 2.9 percent and add an additional 925,000 full-time jobs.
Collins is listening to Maine people. I joined a group of small-business owners from Maine two weeks ago, who traveled to Washington to meet with Collins and express our support for and concerns about federal tax issues. She, as always, was attentive, truly interested in our concerns and responsive. She again exhibited to us that she has studied the issue and was seeking changes that she believed were in the best interest of her constituents back home.
It’s high time for tax reform in America, and I’m glad to see Collins and Rep. Bruce Poliquin working hard to advance policies that will help Mainers thrive.
This commentary was originally published in the Bangor Daily News.