The tax reform committees began discussion early this week.
(Mobile Conservative) — This week, the Hill published an op-ed from Alfredo Ortiz, president and CEO of the Job Creators Network, and economist Stephen Moore praising Trump’s proposed tax reform plan as “a victory for American workers and small businesses.”
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U.S. lawmakers are currently debating the details, so changes to the plan are likely; However, the current plan specifics are 100% America First.
The op-ed states, “The bill calls for a new 25 percent top marginal small business tax rate, down from the current 39.6 percent rate on successful businesses. This reform will allow millions of American manufacturers, retailers, and other small businesses to keep more of their earnings necessary to compete with their big business and international competitors. It will also help keep them located here in the United States.
There are caveats to the new 25 percent rate. First, only 30 percent of qualifying earnings can be considered business income and subject to this new rate. The other 70 percent will be considered wage income and will be taxed at the new individual tax rates. By the way, the current 39.6 percent rate on America’s small businesses is one of the highest in the world. Most other nations already provide a lower tax rate for the small entrepreneurial firms.
Why this 30-70 split? This is a much needed guardrail to prevent taxpayers from gaming the system by simply shifting their wage income to business income. This is what tens of thousands of wage earners did in Kansas after it eliminated its small business tax in 2012 without implementing similar guardrails. A memorable example: University of Kansas football coach David Beaty classified more than $500,000 of his salary as tax-free business income. But, if some businesses don’t like this simple 30-70 rule, they can elect to apply a formula based on the facts and circumstances of their business.
Second, professional services small businesses such as accounting, financial, and communication firms would be prevented from accessing the 25 percent rate altogether. While we agree the optics of a hedge fund paying a lower tax rate than a wage earner in the heartland are bad, we would like to see this 25 percent rate extended to all small businesses that are also employers, regardless of industry classification, in order to do the most good for employees, job seekers, and the overall economy.
The bill isn’t perfect, but some of the complaints we’ve been hearing aren’t justified. We were surprised and disappointed the National Federation of Independent Businesses responded negatively to the plan. Its president, Juanita Duggan, said, “This bill leaves too many small businesses behind.” But in reality, nearly all American small businesses, even those that don’t qualify for the new 25 percent rate, would get tax relief under this bill. Since the vast majority of small businesses pay tax at individual tax rates, they will benefit along with all hardworking taxpayers from the bill’s new individual rate structure.”
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H/T: Breitbart
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