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The benefits of tax reform continue to roll in—and not just for businesses. As our leaders in government promised, many Americans across the country are now seeing a welcome surprise in the form of higher paychecks.
The reason for the bump? With new, lower tax rates in place for 2018, the IRS updated federal withholding tables, which govern the amount in taxes employers deduct from paychecks each month based on the taxpayer’s characteristics. The deadline for adopting these new tables was last Thursday, February 15. With these changes, as many as 90% of workers across America are now officially keeping more from their paychecks.
Almost immediately after passage of the Tax Cuts and Jobs Act in December, many workers received bonuses, raises, or other benefits. These gains came from a range of businesses—from agriculture to manufacturing to services. They came from big businesses such as American Airlines, which announced it would give $1,000 bonuses totaling about $130 million, and from small businesses such as RPMS Group, which awarded $1,000 bonuses to its employees. These announcements have been widespread, impacting over 3 million workers to date.
For those who have been advocating for tax reform for many years, it comes as no surprise that workers are directly benefiting from the law’s passage through generous bonuses or pay raises from their employers and by getting to keep more of what they earn. This is as it should be.
As I often point out, the money we pay in taxes is not the government’s money; it’s our money that we share with the government.
Good news for workers is also good news for the entire American economy. With a boost in take-home pay, consumers will be able to invest more of their earnings in their families and local economies. Higher wages, increased consumer spending, and a rise in business investment owing especially to the lower corporate rate are all positive developments for economic growth—and economic growth, in turn, will raise government tax revenues.
The advantages of tax reform are reaching far and wide, and they’ve only just begun. Businesses will feel the impact in every quarter going forward, and Americans will feel it in every paycheck. For the entire American economy, tax relief is truly a gift that keeps giving.