Andrew Guernsey, a legislative assistant for Government Affairs with the Family Research Council in Washington, D.C. about the real effects of the “Tax Cuts and Jobs Act.”
Thanks for joining us this week for Family Policy Matters. I am sure most, if not all, of us have heard about the new tax reform bill recently passed by the U.S. Congress and signed into law by President Donald Trump on December 22. If you’re like me, you’ve had a pretty difficult time filtering through all the news reports, and frankly, the talking points that have been put forth by politicians, political parties and advocacy groups. Today, we’re fortunate to be speaking with Andrew Guernsey, a legislative assistant for Government Affairs with the Family Research Council in Washington, D.C. about the real effects of the “Tax Cuts and Jobs Act.
JOHN RUSTIN: Andrew, welcome to Family Policy Matters. It’s great to have you on the show. I appreciate your helping us make sense of this somewhat complex matter.
ANDREW GUERNSEY: Great to speak with you today.
JOHN RUSTIN: Andrew, what are the biggest short-term changes that the average American family can expect from this national tax reform bill?
ANDREW GUERNSEY: One of the biggest changes for families is the increase of the child tax credit. And the child tax credit is something every family can get if they have a child under 17. And the Bill doubles it to $2,000 for each qualifying child under 17. So, that’s a huge benefit for families who have to suffer some of the hardships of the economy to have finally a bit of a boost. That’s one of the main reasons why families can look forward to this tax bill’s implementation this year. The other big thing is the elimination of marriage penalties. The Bill gets rid of a lot of the marriage penalties that are in the tax code when it comes to income brackets. Marriage penalties often will make it so that if you get married, you have to pay a higher tax bill. And the Republican Caucus looked at that and said, “Look, marriage and family stability is something that we ought to encourage as a vehicle of helping families flourish, rather than penalize.”
JOHN RUSTIN: Was this an across-the-board tax cut? Also when should families start to see the impact of these changes in their weekly or monthly paychecks?
ANDREW GUERNSEY: Absolutely. So this is an across-the-board tax cut. Nearly every person will benefit in some way from the provisions in the tax bill, with a few exceptions. But the paychecks, the increases to that, you’ll start seeing as early as February this year—some have already started to see it—once employers process the guidance from the IRS on how much to withhold from the paycheck. We’re already seeing those changes and hopefully all your listeners here will start to see these changes as early as the next couple of weeks.
JOHN RUSTIN: That’s exciting. And I want to encourage our listeners to pay attention to your paycheck stubs and note when those tax cuts become effective and you start seeing a real implication in your pocketbook. It’s very important to understand that the actions that Congress takes definitely do have an impact directly on us. Now Andrew, tax benefits are often tricky to calculate because each family’s situation is different, depending upon things like: income, geography, which state they live in, the number of children in the family. You talked about the child tax credit and also, an individual’s investment portfolio and other factors. Do you consider the changes made by this legislation to be mostly good, mostly bad, or kind of a mixed bag for American families?
ANDREW GUERNSEY: I’m confident it’s mostly good for families and there are a couple of reasons why. I mentioned the child tax credit as one thing. It also includes a new child independent care credit of $500 for dependents. That’s a true credit, so that people taking care of an elderly grandparent or an older child, who can’t qualify for the child tax credit, can benefit from that fact that they’re paying for a lot of these dependent care expenses. So that’s a big win for helping keep the family structure incentivized together. It’s also great that the Bill provides and keeps the adoption tax credit in current law. That helps families open their hearts and homes for a “forever family” for an adopted child. That’s an important provision that they retained in the Bill. It’s about in the $1,300 range in current law of what families can get as a credit for those high-cost expenses that go along with adoption. It’s so great to see that a lot of these pro-family provisions are retained in the Bill, and improved in many cases. We also saw—It’s true that families will be impacted by the loss of personal exemptions, but that’s folded into a larger standard deduction. So they’re doubling the standard deduction, which means that if you’re married, you’re now going to get a [$24,000] deduction, which is quite a boost compared to current law. So that’s more money in your pocket, which you can use to help families take care of their young ones, and that’s something I think we can celebrate.
JOHN RUSTIN: That’s great! And I think we’ll certainly dig into this a little bit during our conversation. Some of the things that you mentioned, I know, were areas of significant concern throughout the negotiations of this tax cut proposal or bill that ultimately passed. As it was a proposal in both the House and the Senate, I know that we heard from constituents that were concerned about the things that you’ve mentioned—the child tax credit, the adoption tax credit—other things like that being significantly impacted, and not in a positive way. But ultimately, it seems like most of what happened and most of the concerns that were expressed about those things were addressed. Some of the effects of the Tax Cuts and Jobs Act can differ pretty substantially from state to state. Do you have a sense of how North Carolina families will fare, say compared to families in other states across the country?
ANDREW GUERNSEY: Sure. So, the state you live in does impact to what extent you benefit from some of the changes that the law provides, specifically about the deductions for state and local taxes. The final Bill allows people and families to deduct up to $10,000 in state and local taxes, property taxes and/or sales taxes. You choose the combination to fill up your $10,000 deduction tank. That change will no doubt impact some higher-income earners in more liberal states that have high tax rates. If you look in the text of the Bill, you see also cutting tax rates, in fact lowers the highest tax rate income bracket that would have more of a bigger impact on SALTs, which is the state and local taxes. It’s clear that the Bill moves in the trajectory of letting people keep more of their own money and the vast majority of income earners across the board are going to see those cuts. So families, regardless of the state you live in, are going to see more money in their paychecks.
JOHN RUSTIN: We heard critics throughout the process claim the Tax Cuts and Jobs Act only benefits businesses and the most wealthy Americans and really could potentially harm the middle and lower-income families. How did FRC respond to these claims?
ANDREW GUERNSEY: A lot of that is based on the talking points that we’ve seen from the other side that for the longest time, they were saying, “The sky is going to fall!” “Some people are going to die!” There was a lot of rhetoric on the other side about how damaging letting people keep more of their money was going to be. But it’s good to see now that people are starting to see the bonuses roll out, starting to see, just at the beginning, of people keeping more of the money in their paychecks so they can provide for their families. I think this has already sort of mitigated that narrative you referred to that this is just a cut for the one percent. But in reality also, it benefits a lot of small businesses with a pass through deduction. That’s a brand new, extremely important provision. A lot of people, small businesses, they’ll file their taxes for their business on their individual returns. And the fact that we’re cutting the individual return rate and the corporate income taxes down to 20 percent, or rather 21 percent, allows this pass through deduction, so that small businesses that use that file on their individual tax rates can get a deduction so that they’re not penalized because they’re not a corporation. So I think it’s important, the bill provides important ways to level the playing field and reduce those loopholes that allow the big corporations to benefit. And in fact, it passes those benefits, many of them, along to people in middle class families and small businesses.
JOHN RUSTIN: Very good. What does the bill do with respect to education savings?
ANDREW GUERNSEY: That’s one of my favorite less-talked-about provisions in the bill. I’m glad you mentioned it! What it does is it allows 529 education savings accounts to be expanded from what currently can only be used for college tuition and graduate school tuition, to now be used for families for elementary or secondary, public, private, and religious schools. So what this means concretely is that you can start contributing to your child’s—not just their college education through a tax-benefited 529 savings account, but also for your kids K-12 expenses. So, you can tap into those funds earlier and help promote school choice. And this is also key in a lot of states that provide huge benefits at the state income tax level. So there’s many states across the country that will provide tax credits and deductions on your state taxes based on how much you contribute to your child’s—now college, but now K-12—education. So that’s a big win across the country.
JOHN RUSTIN: I know there were a number of groups, non-profits among them—and this is an issue that we were looking at quite closely because it certainly could impact organizations like the Family Research Council and like the North Carolina Family Policy Council—and that is the concern that the bill could have a negative impact on charitable giving. Talk a little bit about that if you would.
ANDREW GUERNSEY: I’m glad you brought it up because as you know, no bill’s perfect and often there are unintended consequences of a lot of policy changes here. And one of those that we were concerned about was the increase in the standard deduction by twice. So, now it’s $24,000 for married couples. That often incentivizes a lot of people who would otherwise be getting that deduction for charitable giving now, to become non-itemizers and take the standard deduction. So we are urging Congress, in addition to the legislation already passed, to consider bills like the Universal Charitable Giving Act, which would allow an above-the-line deduction, and other means like this to try, to mitigate some of the impact where fewer people itemizing would result in, potentially, less giving. The only way to see is what comes in the next year as far as how people behave in response to the tax bill. We are hopeful. And we want to encourage people to take more of the money you keep in your paycheck and consider supporting many of those organizations that are instrumental in trying to protect life and family and those things we care about.
JOHN RUSTIN: Certainly, those charitable deductions for many—and we’ve just come through the end of the year, which for many charitable organizations is a big time because people are really trying to limit their tax exposure. And in doing that, balance their giving to organizations to maximize the charitable giving that they do. So, it will be interesting to see what kind of impact this has on giving. But we want to encourage our supporters—and certainly expect that they will—continue to give generously to the efforts of groups like the Family Policy Council and the Family Research Council and other organizations that work for things that they believe in. And finally, Andrew, does the law include, what you would consider to be, any long-term changes to our national tax policy that American families need to be aware of in the coming years?
ANDREW GUERNSEY: That’s a great question. The Tax Cuts and Jobs Act actually—unfortunately due to Senate Rules—was only able to extend the individual tax cuts through the year 2025, which is about seven years from now. So either then, they are going to have to have a decision whether they will continue or make permanent the cuts to the individual rates, so your average tax bracket, or whether to change those. So, that’s going to be up to a future Congress, or this Congress, if they can develop a bi-partisan consensus to make those cuts to the individual rates permanent. So, we would definitely want to pay attention when it gets closer to 2025, make sure everyone plans accordingly to stay on top of where the political scene is at. But at the same time, I think once people see the impact it’s going to have on their lives to keep more of their money in their paychecks, they’re not going to want to elect members of Congress who are going to jack up their individual rates. So, that’s something to keep aware of in the long-term future. But I think this is a big win for the American people.
JOHN RUSTIN: Great. Andrew, before we depart our conversation today, where can our listeners go to learn more about this particular Act, but also about the great work of the Family Research Council.
ANDREW GUERNSEY: You go to FRC.org, you can find everything Family Research Council has to offer, all of our publications online. So, you can go check it out. We have a piece up that I wrote on the new tax bill and how it helps and effects families. Log in on FRC and sign up for our emails and we will be happy to keep track for you of what Congress is doing and how you, the listeners, can make an impact by calling your congressmen and staying abreast of these things.
JOHN RUSTIN: With that, Andrew Guernsey, I want to thank you so much for being with us on Family Policy Matters and for helping to bring clarity to a complex but very important issue! And we are so grateful again for all the wonderful work that Family Research Council does in our nation’s capitol.
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