COLUMN: Answering Questions on Tax Reform
I was proud to support House passage last week of the Tax Cuts and Jobs Act. I am convinced that our tax reform bill not only fulfills our promise to take a historic step to simplify and modernize our tax code, but it is designed to help middle-income families in Central Washington.
What happens to the tax rate of families in Central Washington with the doubling of the standard deduction?
The median household income in the Fourth Congressional District is $52,484. Assuming this median household represents a family of four with two children, doubling the standard deduction to $24,000 means that $28,484 of income would remain subject to the federal income tax. Under the new tax bracket of 12%, and with our bill’s expansion of the Child Tax Credit from $1,000 to $1,600, and the creation of the Family Tax Credit of $300 for each parent and non-child dependent, that means this family would be able to claim $3,800 in credits for a federal income tax liability of $0. That more than makes up for ending current personal exemptions, which under the current system would leave that same family with a $605.10 federal income tax bill.
What about families that choose to itemize deductions? In the Fourth Congressional District, more than 80 percent of filers use the standard deduction. That means that families that opt to use the standard deduction would see a reduction in their tax liability. The average amount of itemized deductions per filer in Central Washington is roughly $21,300, and with the expanded standard deduction, more may be able to use the standard deduction to simplify their return.
I also heard concerns raised about reducing the mortgage interest deduction, so here are some facts.
First, the Tax Cuts and Jobs Act does not change the mortgage interest deduction for current homeowners. Under our reforms, the reduction of the mortgage interest deduction will only apply to new homes over $500,000.
Second, according the most recent available census data, the median value of owner-occupied homes in the Fourth Congressional District is $182,000, which is well below the $500,000 limit. Currently, fewer than 3.5% of homes in the Fourth Congressional District are valued at $500,000 or above. Why should taxpayers in Okanogan County, where the value of a typical home is $190,000, continue to subsidize pricier homes in King County? That is simply unfair, and our legislation would reduce the use of this deduction to benefit a lucky few.
Additionally, our reforms would also cease subsidizing second homes through the tax code—because second homes tend to be luxuries that few middle-class families can afford.
I have also been asked about the Adoption Tax Credit, which was retained in our bill by an amendment by House Ways and Means Committee Chairman Kevin Brady.
The legislation now moves to the Senate, where there are likely to be changes before the bill comes back to the House. I encourage you to read and learn more about the bill at www.fairandsimple.gop. As I did with the House proposal, I will keep a sharp eye out to ensure that any final legislation helps families in Central Washington.