For years—especially since the Republican Congress and President Obama agreed to extend the Bush tax cuts to all but those in the highest brackets -- passthrough businesses have been bemoaning their potentially unfair treatment under the next tax reform.
Tax Analysts Blog
Corporate tax cuts are in the air. Pretty much every elected Republican is determined to slash the tax rate on corporate income, and even some Democratic politicians like the idea. But you know who doesn’t? Almost everyone else.
I recently pondered whether the widely anticipated federal tax reform effort would include a corporate integration proposal from the Senate Finance Committee. That post presented the rationale for eliminating – or at least minimizing – the double taxation of corporate profits. It also outlined how a hypothetical partial dividends paid deduction might be structured.
There’s no shortage of lofty ambitions when it comes to tax reform. Among the list of aspirational goals is the concept of corporate integration—that is, rationalizing the treatment of corporations and their shareholders in a way that mitigates the double taxation of business profits. Doing so would make our tax code more neutral and reduce distortions such as the bias in favor of debt financing.
President Trump wants to make the income tax simple again. Unfortunately, it’s never been simple – not in the last year, the last decade, or even the last century. And it’s probably going to stay that way.
Tax reform is hard work, despite what President Trump said during the House’s attempt to repeal Obamacare. It requires filling in a lot of details and anticipating opposition from business and interest groups that don’t like the idea of winners and losers. Despite talking about tax reform as a centerpiece of their agenda since 2010, the GOP really hasn’t done much of the work to build support within their caucus and the public at large for a real plan.
In case you missed it, the border-adjustable tax officially got the boot. Don’t feel bad if you were among those intrigued by the House GOP blueprint for tax reform. The proposal enjoyed a good run, and served as a useful tutorial on foreign currency adjustments.
After failing spectacularly on healthcare reform, the Trump administration and Republicans in Congress will now turn their attention to taxes. President Trump is stumping for a tax cut as the signature achievement of his first term. But forces inside the White House have a different idea in mind. Chief Strategist Steve Bannon is reportedly pushing for a 44 percent top tax rate on incomes over $5 million.
Will tax reform necessarily contribute to economic growth? It’s tempting to answer with a resounding yes, but the better response is more cautious. The outcome depends on the details, suggesting that stakeholders would do well to manage their expectations.
The typical U.S. citizen is rightfully concerned about how much tax they pay, but their interest in the details of the tax code extends only so far. Broach the intricacies of transfer pricing and most people’s eyes immediately glaze over. This presents a challenge to proponents of tax reform legislation.