Many readers have, no doubt, been following the talk of the changes coming down the pipeline with respect to the federal tax system. The proposed changes are on multiple fronts, including individual income taxation, estate taxation and corporate taxation.
According to commentators talking about the proposed changes, President Trump started with a promise to reduce the corporate tax rate to 15 percent. Through discussion and debate, Trump’s team came to include within its proposed tax reform a number of other changes to the federal tax system. First of all, House Republicans have proposed moving the corporate income tax rate from 35 percent to 20 percent, which doesn’t quite hit Trump’s goal but gets closer.
The proposed change for S corporations, which pay business taxes through the tax returns of the owners, is to drop the tax rate from 39.6 percent to 25 percent. Another change Trump plans to make to the tax code is to stop the practice of taxing overseas income that comes back to the United States. The details of the policy are still being hammered out, but American businesses would have the ability to bring earnings back to the United States without incurring any fines or taxes, as happens under the current system.
It is also being proposed, under Trump’s border adjustment tax, that the value of exported goods should be exempted from border taxation, while the value of imported goods should be taxed. This is a particularly controversial proposal since it would increase the cost of imported goods for consumers. On the other hand, as some commentators have pointed out, it will also allow consumers to buy more goods and services for their money.
In our next post, we’ll continue looking at some of Trump’s proposed changes and what it might mean for businesses going forward.
Source: CNBC, If Trump and Congress ‘botch’ tax cuts, GOP could lose House, Republican Steve Forbes warns,” Matthew J. Belvedere, Feb. 8, 2017.