Rep. Costello: Tax Reform to Support Hardworking Families
Starting a new savings account, upgrading home appliances, improving wages and benefits for employees, and buying new equipment for a business are each examples of what I’ve heard constituents can do because of tax reform under the Tax Cuts and Jobs Act.
When I voted for this legislation, I was thinking of the hardworking families in Pennsylvania and how they deserve to keep more of their earnings. Under the new law, Pennsylvanians of all income levels will see a positive change. In the Sixth Congressional District, the average family of four will keep an additional $3,402 of their annual income.
Families with children will now receive an expanded child tax credit to support families and help offset the expenses related to raising a child. For parents who are saving for their children’s education or hoping to go back to school themselves, the law improves savings accounts for education, and tuition waivers for graduate students remain untaxed. If you or a family member faces costly high out-of-pocket medical costs, the preserved medical expense deduction remains available.
Throughout the tax reform debate, I was focused on making sure workers keep more of the money they work so hard to earn each day, and the new tax law has lowered tax rates across the board. Starting in February, employers will be required to implement new withholding tables that represent changes made by the tax law, which will result in a boost in how much you see in your paycheck.
If you are one of the nearly 70 percent of taxpayers who claims the standard deduction instead of taking itemized deductions, the amount of your earnings that will go untaxed has nearly doubled. Single filers will now be able to claim a deduction of $12,000, instead of just over $6,000, and those filing jointly will be able to deduct $24,000 instead of just under $13,000.
The tax law includes positive changes for small business employees and owners, too. Lower tax rates and a 20 percent tax deduction for pass-through business income, which applies to most small business owners in the Commonwealth, means the job creators on Main Street are now able to keep more of their earnings to reinvest in their employees, products, and services. Put differently, this means the local businesses you shop at or use for a service can reinvest more in their company for better services for their customers and better benefits for their employees.
In addition, the corporate tax rate was reduced to 21 percent from 35 percent, making our country more competitive in the global economy and enabling employers to increase the investment they make in their employees. Many of the announcements exclude the company’s leadership or senior level team.
Hundreds of employers around the country have reacted to the new tax law by increasing hourly wages, announcing bonuses, increasing 401(k) contributions, or offering healthcare coverage for the first time. Nationwide, Boeing, and Comcast are among the employers in our community that are using their tax savings to give back to their employees.
It is impossible for major reform legislation to perfectly reflect the priorities of each taxpayer and each Member of Congress, and there were certainly aspects of the bill where I preferred a different outcome. But I do not support the status quo tax system.
Hardworking low and middle income families deserve a better system, and after 31 years of operating under a worn-out system, this tax reform injects new life into our economy and provides real financial relief to American families. It is the responsibility of Congress to update laws when needed, and modernization of our tax code was long overdue.