As we turn the page to a new year, January is a time in which many Americans take the opportunity to make positive changes in their lives. Business owners may seek to expand their businesses, entrepreneurs may seek to start a new enterprise, and families may wish to purchase a new car or save enough to buy their first home. With the recent passage of the Tax Cuts and Jobs Act, the opportunity to achieve these goals – whether personal or professional - is greatly enhanced. Now if you’re looking to lose weight, this probably won’t help you!
The average American family will get to keep more than $2,000 this year under the Tax Cuts and Jobs Act. In addition to lowering the rates for every income bracket, this law doubles the standard deduction, doubles the child tax credit and repeals Obamacare’s individual mandate which imposed an unfair tax on mostly lower-income families making less than $50,000 a year. Businesses will also see relief, with a new corporate tax rate of 21 percent (from 35 percent), taking the U.S. from one of the highest to one of the lowest corporate tax rates in the world. Small businesses also benefit, as the Tax Cuts and Jobs Act creates the first-ever 20 percent deduction for pass-through business income.
The American economy is already responding. The stock market is breaking records this month as the Dow reached 25,000 for the first time ever. Businesses are announcing new investment and bonuses for staff. Over 100 U.S. companies have already announced plans to increase wages, pay yearly bonuses, increase 401K matches and expand charitable contributions because of the tax reform bill. Wells Fargo, which is chartered in South Dakota, has announced that it plans to increase its minimum wage to $15 per hour, effective in March 2018. We expect even more businesses to follow suit in coming months, as the Tax Cuts and Jobs Act provides companies with the capital and stability to reinvest in themselves, their employees and the economy.
Agriculture, South Dakota’s largest industry, is poised to benefit from tax reform as well. In a Farm Forum article from December 26, 2017, Wheat Growers CEO Chris Pearson calls tax reform a “win” for farmers. This is due to an amendment in the final bill that stops a massive tax hike for farmer co-ops that was projected to cost them $2 billion annually.
Individuals can expect to start seeing the amount of taxes coming out of their paychecks decrease within the next few months, possibly as soon as February. This is great news, and will benefit the majority of South Dakota workers. The Tax Cuts and Jobs Act includes a reduction in individual tax rates, doubles the standard deduction and doubles the child tax credit from $1,000 per child to $2,000 per child.
For far too long, Americans have been saddled with high taxes and an overly-complicated tax code. As we welcome in this new year, the Tax Cuts and Jobs Act will finally provide the tax relief they deserve. In 2018, I look forward to working with my colleagues in Congress and President Trump on other legislative priorities to further grow our economy and make life even better for all South Dakotans.