Alan Beaulieu, President and Principal Economist at ITR, recently took a look at the Tax Overhaul Proposal authored by David Camp, Chairman of the House Ways and Means committee. What he reports is chilling for small manufacturers, prospects for employment, and the economy.
Headline Talking Points: A reduction in the corporate tax rate to 25% and a decrease in the number of personal income tax brackets are what you will hear about.
Those pesky details:
- This plan would cause significant tax increases to those currently in the 39% bracket.
- The loss of deductions and a phasing out of the benefit of the lower tax brackets would raise the effective rate to 42% on many higher-income earners.
- The Brookings Institute states that a slice of America would be taxed at up to 60%.
Is your company a pass through tax entity (ie, not a C-Corp)?
Rep. Camp’s plan would place firms like yours at a significant disadvantage in that it would reach into the business income of these enterprises (income after the deduction for owner’s salaries) and make 70% of that business income subject to payroll taxes.
Does your company have a foreign subsidiary or operations? Double taxation may be in your future. Mr. Camp, and others, wants to reach overseas and claim a piece for Washington, and they not only want to tax income but also brick and motor investments.
What ever happened to “Thou shalt not covet?”
Do the folks in Washington really think that confiscatory taxation of the small to medium sized businesses that are the backbone of US employment and engines for growth will encourage hiring and growth after this plan increases their taxable income by 70%? (These businesses employ one out of every four workers here in the U.S.)
I can’t think of a single way that this so called “reform” will encourage growth here in the US. Maybe the recession of 2007-2009 was just a practice round…
PMPA has a contract arrangement with ITR Economics for Business Cycle analysis and reporting for our members.