Tax Day has historically been a day of frustration and confusion for many of us. Millions of Americans and thousands of Alaskans spend hours poring over W-2s and receipts in preparation for the filing deadline. The forms, the deductions and credits can be maddening. It's also a day that taxpayers get to see, in black and white, exactly how much we are paying our federal government to run our government. For many, the answer has been "too much for too little," especially as so many Alaskans are struggling as a result of our recession.
But the historic tax reform legislation that Congress passed and the president signed into law this past December will help and this will be the last year that Alaskans will file under the broken system. Not only does the reform greatly simplify the tax code, but it has already helped spur economic growth. In the past few months, nearly all Alaskans should have been seeing larger paychecks thanks to the tax reform bill. The Treasury Department has estimated that 90 percent of American workers will see pay increases as a result of the law.
How exactly does the new tax code help Alaskans? First, it doubles the standard deduction. For an individual, the standard deduction goes from $6,350 to $12,000. For a married couple, it goes from $12,700 to $24,000. The bill doubles the child tax credit from the current $1,000 to $2,000 per child. The bill also lowers individual tax rates for middle-income Americans.
Bottom line: An average family of four, making about $73,000 a year, will get about $200 more a month, or about $2,400 a year. A single parent making $40,000 a year will see their tax bill decrease by $1,300. That's a 73 percent decrease. This is real money that will help stretch family budgets in these lean times and will offset Permanent Fund Dividend cuts.
Further, thousands of workers in Alaska have already received bonuses and pay raises from companies doing business in our state because of tax reform. Also, thousands of Alaskans will likely soon be seeing a decrease in their utility rates because of tax reform.
Importantly, the new law also decreases taxes on our small businesses and American companies so that they can reinvest in our country and in Alaska, hire more workers, give pay raises, and help grow our economy. In 2012, President Obama said that our current business tax structure hurt American business and inhibited growth because the rates were too high relative to other countries. He said that the tax system, "provides tax breaks for moving jobs and profits overseas and hits companies that choose to stay in America with one of the highest tax rates in the world."
Something had to be done and we took appropriate action that included significant benefits for Alaskans beyond just tax reform.
Most Alaskans celebrated the fact that the tax bill, at long last, authorized the opening of the 1002 area of the Arctic National Wildlife Refuge to responsible resource development. This has been a 40-year bipartisan goal for our state that we were finally able to achieve.
There are other provisions in the bill that will help Alaskans. The new law helps our families by using tax credits to encourage employers to offer workers up to 12 weeks of paid family leave. For Alaska Native Corporations, which are such big drivers of our economy, we were able to get provisions included that provide favorable tax benefits for donations of cash or assets into settlement trusts. These trusts are used to support Alaska Native programs that provide healthcare and education and manage Alaska Native lands.
Another important program that was part of the tax bill created what are called "Opportunity Zones," which have the potential to promote further economic investment in underserved, rural and impoverished areas across our state.
Opportunity Zones are areas in qualifying census tracts based on the average income of residents living in those tracts. Alaska has approximately 68 qualifying tracts, encompassing a huge swath of our state. Currently, Gov. Bill Walker's administration is in the process of designating 25 of these tracts where investors can establish "Opportunity Funds" to invest in projects within these zones and receive significant tax benefits. Many communities have petitioned the governor to be included in this program, which has the potential to be a much-needed source for spurring economic growth and investment, providing an opportunity to spark the flame of entrepreneurship in Alaska.
Simply put, the tax bill is a major win for Alaska and for our country. The less money that Washington takes from the private sector, the more Alaskans can put toward creating business opportunities and hiring workers. The more money Alaskans have in their paychecks, the more they can save for their kids' college, pay off bills, take a much needed vacation, or circulate that money in our local economy.
My number one focus as your senator has been to enact policies that spur much-needed economic growth and opportunity across Alaska and America, benefiting Alaska's workers and families. The law that we passed in Congress does just that.