Reforming the tax code
Tax reform and reduced regulations have set the American economy on an upward trajectory with growth eclipsing four percent. New jobs have outpaced the labor force, increasing wages and setting off a bidding war for workers in many sectors of the economy. The impact of cutting taxes and decreasing regulation cannot be understated, which is why I helped to produce a second round of reform aimed at small businesses and individuals as a member of the House Ways and Means Committee.
This second round of cuts and reforms, which passed the House during the last week of September, was comprised of three bills, each with a distinct purpose: making individual and small business tax cuts permanent, encouraging families to save more earlier for retirement, and incentivizing entrepreneurship. The Protecting Family and Small Business Tax Cuts Act will make provisions such as the tax cuts for families and the 20 percent deduction for farmers, ranchers, and small businesses permanent in order to ensure individuals and small business throughout Nebraska enjoy the same benefits as larger corporations.
It also included the bipartisan “grain glitch” fix, which sought to mimic Section 199a treatment of cooperatives under the previous tax code to ensure as many producers as possible see reductions in their taxes. It was a top priority for me to ensure language making this treatment permanent was included in the second round of tax reform. Due to Senate rules which limited certain changes to the tax code beyond ten years, these provisions couldn’t be made permanent in the Tax Cuts and Jobs Act.
The purpose of the second bill, the Family Savings Act, is to make a number of changes to the laws governing retirement accounts to encourage more families to save for retirement. For example, by allowing families to make a onetime withdrawal for the birth or adoption of a child, families can feel confident saving more because they will also have better access to their own money when they need it most.
It will also make pooled employer plans more feasible, which currently face a number of bureaucratic hurdles, allowing small businesses to join together in order to offer better retirement vehicles for their employees. Further changes include the elimination of age limits for Individual Retirement Account (IRA) contributions as well as exemptions from Required Minimum Distributions (RMDs) for accounts with relatively smaller balances.
Finally, the American Innovation Act quadruples the deduction allowed for startup expenses for new businesses from $5,000 to $20,000 and indexes this amount for inflation. It will also allow for losses incurred in the early stages of new businesses to be carried forward in the event of shifts in majority ownership. These changes are intended to help more ideas develop from concepts and ideas into viable businesses to create jobs and strengthen our economy.
This second round of reform is important to ensure as many Americans as possible benefit from lower rates and simplified compliance. As always, any changes to our tax code should allow the American people to keep more of their paychecks in order to spend or save their dollars in ways only they know best. I’m proud to have done my part to guide these bills through the process, and I appreciate everyone who attended my tax roundtables throughout the Third District to contribute to the discussion.