Business Impact of Tax Code Rewrite Unclear

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.

“At first glance, business' interests would seem clear,” BusinessWeek reported. “Support 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.”

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 “higher fees that states and localities are putting in place to fill the holes in their budgets.”

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.

You may like these other stories...

IRS audits less than 1 percent of big partnershipsAccording to an April 17 report from the Government Accountability Office (GAO), the IRS audits fewer than 1 percent of large business partnerships, Stephen Ohlemacher of the...
Is it time to consider a value added tax?Forbes contributor Joseph Thorndike wrote yesterday that he believes the tax reform proposal by House Ways and Means Committee Chairman Dave Camp (R-MI) was dead on arrival. But he...
Read more from Larry Perry here and in the Today's World of Audits archive.The planning phase of an audit engagement of an entity using US GAAP or a special purpose framework will, with minor differences, include similar...

Upcoming CPE Webinars

Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.