For decades, a thorough reform of business taxation and rewriting the American tax code have been among the most sought-after goals by Republican lawmakers, and it seems as if they may take place under the Trump administration; however, the changes will probably be less radical than what has been proposed.
In the middle of May 2017, the Ways and Means Committee of the House of Representatives announced that deliberation on tax reform was pushing ahead despite all the scandals in the White House. The inauguration of the tax reform legislative debate featured the opinions of four business executives and one investment adviser who had been briefed on the proposals.
Corporate Tax Cuts and Their Effect on the Economy
The proposed tax reform package seeks to cut taxation rates across the corporate and small business spectrum. The chief financial officer of AT&T told the Committee that lowering taxes would have a beneficial effect on the economy because it would encourage companies to invest more capital, increase corporate spending and hire more employees. The owner of a mid-sized Illinois business dedicated to tool manufacturing concurred with the AT&T executive.
In essence, the GOP is trying to reintroduce trickle-down economics, a strategy sometimes referred to as Reaganomics, but Republican lawmakers are trying to put some distance between economic policy during the Reagan years and the current tax reform proposals.
The argument in favor of lower corporate taxation is simple: company owners who are able to retain more of their income are more likely to seek expansion, which means greater spending and more hiring. In other words, lower taxes often act as stimulants for the economy.
The Current Political Climate for Tax Reform
The CPA and bookkeeping team members at http://bsfaz.com/ believe that the proposed tax reform has a lot to offer to the American economy. One particular provision of the overall reform package would allow business owners to include new capital investments as part of their written off items when they file their annual tax returns. At a time when the economy is recovering at a gradual pace, being able to write off new investments could be very profitable for small companies.
Under the current proposal, the existing 35 percent corporate tax rate would be cut down to 20 percent, but this is a very ambitious goal given the political climate. Even with the control of both chambers of Congress, the Republican Party still faces the numerous issues plaguing the White House, which means that business owners should expect to see a more realistic tax cut around 28 percent.
Another problem is that the initial proposals did not offer much in the way of individual tax cuts or credits, which means that many working Americans would likely be unhappy with tax reform that does not take into consideration their economic contributions. There is also the issue of the border adjustment tax, which would ostensible be used to build a wall or fence between the United States and Mexico; the opposition to this proposed tax has been formidable, and thus it is unlikely to pass.