The president’s 2021 budget proposal extends individual tax cuts. This keeps payroll taxes from automatically increasing on working Americans. That is scheduled to happen in 2026. But by extending those individual tax cuts the budget would cut taxes by $1.4 trillion.
Keeping taxes low for individuals is rightly a key priority for a taxpayer focused budget.
When did Congress last pass a budget?
But the budget does not include similar protections for new business investments. The government incursion into business investments in American workers begin to phase out at the end of 2022. The individual cuts the budget extends are the same changes cutting taxes for 9 out of 10 taxpayers in 2018. They have had significant benefits for Americans in every income group. The average American got a $1,400 tax cut in 2018. That translates into $2,900 for a family of four.
To keep these benefits from reversing, the budget proposal retains the federal income tax rates at the lower levels. It retains the larger standard deduction and the doubled child tax credit. The president’s proposed budget keeps the capped deductions for state and local taxes. These are some, among many other important reforms. These things help the family budget and helps America.
The president’s proposed budget would maintain the permanently lower corporate tax rate at 21%. This is good for businesses and their employees. The business tax rate is down from the 2017 global high of 35%. This stands in marked contrast to proposals from leading Democrats. All of who want to increase the federal business tax rate. Many want to go as high as 42% which is about 10% points higher than any other country. In short they want to kill the goose that lays the golden egg.
Economic growth
The 2017 tax law changes paired with lower rates with changes in depreciation. The most pro-growth reform of the 2017 tax cuts allows businesses to immediately write off many new investments. These rules for immediate expensing are left out of the 2021 presidential budget proposal.
Without these protections of expensing it will be more expensive for new businesses to open. For mature businesses it will be more challenging to upgrade and expand operations. The results will be creation of fewer jobs and slower wage gains. Making expensing permanent is a crucial component of meeting the administration’s 3% growth target.
As the administration develops a formal proposal for tax cuts; and it will need to. Reforms such as expensing and universal savings accounts are crucial components. We need balanced private sector economic growth. That is the only way to secure liberty, prosperity and security to America. The president’s 2021 budget proposal extends individual tax cuts.
