Tax & Job Cuts

Tax Cuts and Jobs Act
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Tax Cuts and Jobs Act
Summary
Tax Cuts and Jobs Act (TCJA), a legislation on tax that was passed into law on the 22nd Dec 2017, came as a reprieve to taxpayers even though the tax relief temporarily runs up to December of 2025. The most notable changes to personal income tax associated with TCJA relate to the standard deduction, itemized tax, and income tax rates. The act also made significant changes to pre-existing provisions like Alternative Minimum Tax (AMT), family tax credits, child tax credit, above-the-line deductions, among others (York & Muresianu, 2018). The main objective of the reforms proposed by TCJA was to caution low-income earners and minimize the hassle for individual taxpayers when filing. The law also intended to salvage the economy by tightening the knob on importation tax, since tax relief on income tax slashes the federal revenue by close to $165 billion annually (York & Muresianu, 2018). TCJA has come under heavy criticisms (Knoll, 2019), both positive and negative, with some claiming that the law was rushed and based on political lines while others praise it for cautioning the low and middle-income earners. Nonetheless, the tax law surely has made some significant alteration to the lives of taxpayers, both positively and negatively.
Notable Changes
One of the fundamental reforms by TCJA was to simplify the tax code that had haunted the taxpayers while filing returns. The tax form was reduced to the size of a postcard, making its contents visible to the filer at a glance. Also, the TCJA almost doubled the standard deduction (York & Muresianu, 2018), both for individuals and collective taxpayers, shifting the focus from itemized deduction to standard deduction. TCJA also tweaked the family provisions available on the tax code to a maximum of two. The simplification of the tax code had some implications. The taxpayers can now spend little time filing their tax returns, allowing them to spend their precious time on more demanding tasks of economic importance. Also, the simplification process puts more emphasis on standard deduction (York & Muresianu, 2018), limiting the time spent on the tax form, and thus translating to maximized tax compliance. The miniaturization of tax code however does not necessarily eliminate complexities. Additional underlying worksheets that are even more confusing have emerged as a result.
Individual tax rates were reduced greatly with the adoption of TCJA. All the tax brackets, except for the lower marginal rate and the second-highest have had a fall of close to 2% for the period 2018 to 2025 when the TCJA valid cease to be valid (Gale et al., 2019). The reduction of tax rates for individual taxpayers increases one's income. High-income translates to high spending, which also directly translates to high economic growth. Also, low tax rates allow for individuals to withhold sufficient amounts to avoid unnecessary ...