The White House will unveil details of the president's proposed tax overhaul Wednesday afternoon, but the meat of the plan is already being reported by several major news organizations.
The plan would reduce the corporate tax rate from 35% to 15%. That would include lowering the rate for "pass through" S corporations to 15% as well, which the Washington Post stated would affect small, family-owned businesses, as well as real-estate companies or law firms.
The White House proposal also does not include the "border adjustment tax" proposed earlier in the year to offset trade deficits with countries such as China and Mexico. That border adjustment tax was also meant to offset the lower revenuew expected from such a major tax cut for businesses.
The tax plan reportedly scores out at adding roughly $2 trillion to the national debt over 10 years. However, White House officials argue that the tax breaks will be offset by increases in economic growth over the next decade.
A key to the tax plan will be the reaction of House Speaker Paul Ryan, R-Wis. As Politico noted, tax reform has been Ryan's baby. He was once chairman of the House Ways & Means Committee, which oversees tax policy. Ryan also pitched the border adjustment tax as a way to offset a cut in the corporate rate. That's because Ryan has argued that tax reform shouldn't add to the deficit. As Politico noted, Ryan could be "steamrolled" by the White House on tax reform, mainly because the president blames Ryan for failing to repeal and replace the Affordable Care Act. http://www.politico.com/…
Politico also pointed out Ryan had proposed a corporate tax rate of 20% "because that's the lowest level he could realistically pay for."
The lower rates would help major corporations that struggle to lower their current taxes. However, several major industries that would lose out include those that "deduct interest payments, expense their equipment and research, and transfer profits to foreign jurisdictions with lower rates."
These tax breaks would go away in return for the lower rates. That could negatively affect farmers who are used to taking bonus depreciation, Section 179 expensing and deducting interest paid on land and equipment loans.
Farmers who file 1040s and Schedule Fs would likely want to look at restructuring because the tax plan does not match lower individual income tax rates with the lower corporate rates. Farmers that rely on Schedule Fs could end up paying higher tax rates than those who have a corporate structure.
For wage earners, the White House is proposing a modest raise the standard deduction, which would make taxes easier and lower overall taxes for average American families. That would largely offset the idea of eliminating the home mortgage deduction, which was an idea floated early by the White House Further, Treasury Secretary Steven Mnuchin wants to simplify the tax code so average Americans could fill out their taxes on a "large postcard."
Trump to propose large increase in deductions Americans can claim on their taxes https://www.washingtonpost.com/…
Trump's Tax Plan: Lower Rate for Corporations, and for Companies Like His https://www.nytimes.com/…
Chris Clayton can be reached at Chris.Clayton@dtn.com
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