Senator Dan Sullivan recently wrote the following letter to his constituents:
Dear Alaskan,
Tax season can be a frustrating time, but as Alaska’s U.S. Senator, I have worked to make it a little less stressful by ensuring that hard working Alaskans can keep more of what they earn and that our small businesses have the certainty they need to grow and create jobs. I want to outline the federal legislation we’ve enacted to help you keep more of your hard-earned money this tax season and in the years ahead.
In 2017, I voted for the Tax Cuts and Jobs Act, which reduced taxes for families and businesses, created a 20 percent small business deduction, and included provisions to encourage American corporations to bring profits back to America rather than holding them in foreign countries with lower tax rates. These pro-growth reforms simplified the tax code, strengthened American competitiveness, helped drive unemployment to a 50-year low, and supported sustained economic growth.
This past summer, we built on this historic tax relief and passed the Working Families Tax Cuts Act (WFTCA). This bill prevented a massive tax hike that would have hit nearly every Alaskan this year. Many parts of the 2017 Tax Cuts and Jobs Act were set to expire–higher individual tax rates, a smaller standard deduction, and a major tax increase on small businesses. Without action, the average Alaskan would have paid thousands more in taxes, and almost 59,000 small business owners in our state would have seen a 25 percent increase in their tax bills. The WFTCA stopped that from happening by making these lower rates and deductions permanent.
For individual taxpayers, the bill permanently doubles the standard deduction and includes an additional 5% deduction. Since most Alaskans use the standard deduction, this change directly lowers taxable income for most families. The Dependent Care Flexible Spending Account (FSA) increases to $7,500 and the Child Tax Credit also increases to $2,200 per child–helping families facing high child care and living costs. Independent economists estimate that the WFTCA will increase take-home pay for an average family of four by more than $7,000 a year.
Now, for the first time, a substantial amount of tip income–up to $25,000 a year–is no longer subject to federal taxes. This is a meaningful change for thousands of Alaskans working in restaurants, hotels, bars, lodges, and tourism jobs, allowing them to keep more of the money they earn during our busy seasons.
The same principle applies to overtime. Many Alaskans depend on overtime to pay bills, especially in industries where the work can be intense and unpredictable. The WFTCA exempts up to $12,500 of overtime pay from federal taxes each year, putting more take-home pay into the pockets of construction workers, mechanics, electricians, law enforcement officers, firefighters, first responders, and countless others who work extra hours.
The WFTCA also reduces the tax burden that many seniors face on their Social Security benefits, creating a new federal tax deduction of $12,000 for retired couples–and $6,000 for individuals. This change helps ensure seniors keep more of what they earned over a lifetime of work.
For Alaska’s business owners, the WFTCA provides stability and long-term certainty. It permanently extends the 20 percent small business deduction, ensuring that local businesses–from fishing operations to retailers to construction firms–aren’t hit with a sudden tax increase. The bill also allows businesses to immediately expense the full cost of new equipment and machinery, reducing barriers to investment in a state where upfront costs are often high.
The bottom line is this: if you are a working Alaskan, or someone running a small business, this bill helps you. It prevents a major tax increase, keeps more of your paycheck in your pocket, supports Alaska families, and strengthens the private-sector economy that Alaska depends on.
If you would like more information about how specific provisions might impact you or your business, please reach out to my office at 202 224-3004 or visit www.sullivan.senate.gov. We are happy to help.
Sincerely,
Dan Sullivan
United States Senator
