With a presidential committee studying a massive revision to the federal tax code, business leaders are unsure of how it would affect their companies.
BusinessWeek asked accountants at Ernst & Young LLP to analyze the impact on hypothetical companies of the two main proposals suggested by the President's Advisory Panel on Federal Tax Reform.
âAt first glance, business' interests would seem clear,â BusinessWeek reported. âSupport the panel's consumed-income tax, which would cut the overall tax from 25.9 percent of corporate income to 7.2 percent. By contrast, its simplified income tax plan would raise taxes for three of the four businesses created by E&Y, though that could be more than offset by tax cuts for investors.â
Both new plans would eliminate 40 tax breaks that are specific to certain industries. They would also lower corporate tax rates from a high of 35 percent to 31.5 percent; change the way income from overseas operations is taxed and how to write off capital equipment.
Meanwhile, for individuals, a survey of 51 major municipalities shows that the state and local tax burden has increased, according to a report by the District of Columbia's Chief Financial Officer Natwar Gandhi.
According to the Wall Street Journal, the report said that a family of four with an annual income of $75,000 paid about $6,884 in local and state taxes on average last year, which is 9.2 percent of their income. In 2003, that family paid average taxes of $6,832, or 9.1 percent of their income.
Mark Zandi, chief economist at Economy.com, told the newspaper that the increase is due in part to âhigher fees that states and localities are putting in place to fill the holes in their budgets.â
Federal tax burdens are also rising, separate studies have show, the Journal reorted. Americans are paying about 11.8 percent of their personal income in federal taxes; the figure was 9.6 percent in 2003, according to Wachovia Corp.