The tax reform proposals floated by the Trump administration and the Republican-led Congress would cut tax rates for individual taxpayers and simplify the tax code. But businesses aren’t being left out of the mix. Other reforms would be aimed at business entities of all shapes and sizes.
One radical reform for business taxes pitched by some Republican House leaders – a switch to a destination-based cash-flow tax – doesn’t appear likely to be approved, especially because President Trump is not in favor of it.
However, other proposals reflecting Trump’s campaign pledges and the House GOP tax reform blueprint issued last year stand a better chance of enactment. Trump renewed his calls for business tax reforms to spur growth in his speech before a joint session of Congress on Feb. 28.
Here are several proposed items that may be of particular interest to your business clients.
Corporate tax rates. Cutting corporate taxes is a high priority of the Trump administration. Currently, the top tax rate for corporations is 35 percent, kicking in at the $10 million mark. Trump has proposed an across-the-board rate reduction to 15 percent for businesses. In effect, this represents a tax cut of more than half for the corporate heavyweights.
Similarly, the House GOP plan would reduce the top tax rate to 20 percent.
Pass-through entities. Besides a corporate tax cut, Trump would allow owners of pass-through entities, like partnerships and S corporations, and sole proprietors to elect to have business income taxed at the 15 percent rate, instead of individually. Even if individual tax rates are reduced as Trump has proposed, a business owner could end up paying just 15 percent as opposed to 33 percent.
About Ken Berry
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a wide variety of newsletters, magazines, and other periodicals.