The House income tax bill introduced Thursday would permanently cut the corporate income tax rate from 35 percent to 20 percent, a decrease of 43 percent.
The tax cut would immediately ensure a more competitive American business climate when compared with businesses in foreign countries that have tax rates as low as 20 percent or even lower.
“My tax reform priorities have been the same since day one: bringing tax cuts for hardworking, middle-income Americans; eliminating unfair loopholes and deductions; and slashing business taxes so employers can create jobs, raise wages, and dominate their competition around the world,” President Donald Trump said.
In advance of the tax plan’s release, which Republicans want to pass before the Thanksgiving break, the Business Council of Alabama joined nearly 300 similar associations and state and local chambers of commerce in signing a letter to Congress sponsored by the U.S. Chamber of Commerce urging passage.
Following the bill’s introduction, the Chamber said the “bold tax reform bill” is just what the nation needs to get the economy growing faster.
“A lot of work remains to be done to get the exact policy mix right and move from a legislative draft to an enacted law,” Chamber Senior Vice President and Chief Policy Officer Neil Bradley said. “The business community stands ready to be an active partner with lawmakers over the coming weeks – and every step of the way – as we push to complete a re-write of our outdated tax system.”
The proposed legislation is a “grand slam” and includes many of manufacturers’ long-sought priorities, National Association of Manufacturers President and CEO Jay Timmons said.
“The proposal is a guaranteed path to surge investment, jobs and economic growth that will lead to better lives for every American,” Timmons said. “Today is a tremendous day in America thanks to this grand slam for hardworking manufacturers and the U.S. economy.”
Some details of the “Tax Cuts & Jobs Act” are:
Responses to common charges can be found here;
Policy highlights can be found here;
Taxpayer examples can be found here;
A discussion of family impacts can be found here.
The Wall Street Journal’s synopsis of main provisions is:
For individuals, the bill would keep the top individual rate at 39.6 percent for high-income earners. (According to Pew Research, 16 percent of taxpayers pay 79.4 percent of the income taxes collected by the IRS. The top 2.7 percent pay 51.6 percent of the taxes.);
Businesses would lose the ability to deduct certain executive compensation above $1 million, which they can now do for performance-based pay;
Tax-exempt bonds could no longer be used to build professional sports stadiums;
Sets a top 25 percent rate for pass-through businesses such as S corporations and partnerships. The plan includes complicated guardrails that limit people from turning what would otherwise be wage income taxed at up to 39.6 percent into business income taxed at a lower rate;
New limits on corporate interest deductions, which would be capped at 30 percent of earnings before interest, taxes, depreciation and amortization, which is a measure of cash flow. Real-estate firms and small businesses would be exempt from that limit;
Creates a new, one-time tax on overseas profits of 12 percent for cash holdings and 5 percent for illiquid holdings, a provision meant to force companies to repatriate overseas profits. Creates a new 10 percent tax on U.S. companies’ high-profit foreign subsidiaries, calculated on a global basis, but active overseas profits wouldn’t otherwise be taxed.
Retirement incentives for 401(k)s and IRAs would be maintained.
The Chamber said digesting the proposal fully may take time, so BCA members are encouraged to provide feedback as soon as possible to Caroline Harris, chief tax counsel and vice president of tax policy for the U.S. Chamber of Commerce. Time is of the essence since the anticipated time between draft proposal, legislative text, and committee markup (and even possible floor consideration) could be very short.
IN CASE YOU MISSED IT
Trump Says He’ll Nominate Jerome Powell to Lead Federal Reserve
Bloomberg News (Olorunippa 11/2) “President Donald Trump said Thursday he would nominate Jerome Powell to be the next Federal Reserve chairman, saying he had won the respect of colleagues at the central bank and members of Congress for his judgment and intelligence.
“‘Jay will bring extensive private-sector experience and real-world perspective to our government,” Trump said in the White House Rose Garden. ‘As a result he understands what it takes for our economy to grow, and just as importantly, he understands what truly drives American success’.
“In Powell, Trump selected a former private-equity executive who favors continuing gradual interest-rate increases and sympathizes with White House calls to ease financial regulations. If confirmed by the Senate, the 64-year-old would succeed Fed Chair Janet Yellen, who has raised borrowing costs four times starting in late 2015 and just began scaling back the central bank’s $4.5 trillion balance sheet. Yellen’s four-year term ends in February.
“Trump has said he supports her efforts to keep interest rates low, and his selection of Powell reflects that. Considered a team player, Powell has generally kept any reservations he had about the Fed’s regulatory and monetary actions under Yellen private. Trump has regularly pointed out that the economy is near full employment and the stock market has reached record highs in recent months. He has shown no inclination that he wants a rapid hike in interest rates.”
Dow Closes at Record High in Wild Session After Release of Tax Reform Bill, Powell Nomination
CNBC (Imbert 11-2) “U.S. equities gyrated on Thursday as investors examined the details of the tax-reform plan proposed by Republicans. The Dow Jones industrial average traded 91 points higher after briefly falling 84 points. The index also hit a record high. Shares of Boeing were the best-performers on the 30-stock index.
“The S&P 500 erased earlier losses as financials rose 0.9 percent. ‘What the market is celebrating is that the process moves forward but the process faces many hurdles’, said Art Hogan, chief market strategist at Wunderlich Securities. Also, it lowers the tax rate on repatriated cash to 12 percent. The Nasdaq composite traded just above breakeven; it fell earlier as tech investors were left disappointed with the 12 percent rate on repatriated cash. A lot of big tech companies have scores of cash outside of the U.S.
“Top White House economic advisor Gary Cohn said Trump would support the bill so long as it preserves key elements. Investors also saw Trump nominate Fed Governor Jerome Powell to become the central bank’s next chair. Powell’s nomination was widely expected by experts and most investors.”