“Tax returns aren’t due for about 15 months until April 2019 and in that time IRS is going to put out guidance that is necessary. Particularly for this pass through provision which undoubtedly will involve some complications. But generally speaking, I think [with this tax reform] we are not aware of any loopholes or true drafting errors yet. We will see in the next weeks and months if anything opens up.”
Details“I think it is a historic moment and a fundamental change in the tax system in the United States primarily for one provision in particular – the change in the corporate tax rate from 35% down to 21%. Overall there’s probably close to 100 provisions, there is 500 pages to this bill. So there are lots of changes. I don’t love every single one of them and I am concerned about the deficit impact this bill will have. But I do think it’s going to drive a lot of investment into the United States. It’s going to make a lot of US firms more competitive globally.”
Details“There are all sorts of changes, international, regular C Corp, these pass through provisions for smaller businesses, and of course on the individual side. Everyone is going to be affected. The truth is, I think a lot of the middle class are going to be affected by a relatively small degree. The code is changing in many ways. Most of them will be better off, can’t guarantee that everyone will be better off…. I think the complexity of the tax code is shifting from the middle class, they’ll have a simpler system, but it’s shifting up to higher income individuals. And for many high income individuals, this pass-through provision is going to be more complex for them.”
DetailsLawmakers are on the verge of fundamentally updating the international provisions of the US tax code. Currently, we have a worldwide system, under which profits US firms earn abroad are subject to US tax minus a credit for foreign taxes paid and subject to a deferral until repatriation. In an effort that began in 2011 with draft legislation from former Ways and Means Chairman Dave Camp, Republicans have been determined to transform the US tax code into a territorial system, under which active income earned abroad is generally exempt from US tax.
Details“The bills both in the House and the Senate not only reduce the corporate C corporation tax rate from 35 to 25%, the issue we have been discussing, but both bills create a lower tax rate for pass through businesses: sole proprietorships, S corps, LLCs. Not all LLC’s will get that pass through. Not all pass throughs will get that break. But there is a large explicit tax break for small businesses. With respect to the question about deductions, those deductions will remain. Business deductions will remain deductible. Other deductions for individuals, some of them are being curtailed, but not on the business side.”
DetailsCongress is deeply entrenched in an effort to reform the federal tax code. Central to this effort is a desire to lower the U.S. corporate tax rate from 35 percent to 20 percent — a level on par with the rest of the developed world. Policymakers are keenly aware of the competitive advantages this change could bring based on similar rate changes across Europe and around the globe.
DetailsThe United States is slowly but surely headed toward a federal debt crisis certain to inflict serious economic hardship on future generations. Today, the amount of federal debt held by the public stands at $14.8 trillion (all figures in this paper are in US dollars). While the US economy is expected to grow 76 percent in the next 30 years, that debt burden will, in inflation-adjusted terms, increase by over 240 percent during that time. Returning to a sustainable fiscal outlook will require hard choices and a clear understanding of both what led us to this point and the economic consequences of inaction.
Details“The House bill and the Senate bill are not identical but are very much on the same page, according to Alex Brill, a resident fellow at AEI, a conservative think tank. Most changes will be technical in nature and carried out by the conference committee. According to Brill, reconciliation might take longer than lawmakers have predicted, but he is confident that the differences will ultimately get resolved.”
DetailsFederal fiscal reform in the United States is increasingly necessary but over the last two decades has remained elusive. Part of the reason for the inaction reflects different political preferences and priorities. Part of it reflects differing views about the possible economic and social effects of controlling public spending and fiscal deficits. The result is that the US federal debt continues to grow unabated, which poses an increasing threat to future generations of citizens.
DetailsBoth the House’s tax bill and the Senate Finance Committee’s bill slash the corporate income tax rate from 35 to 20%, a much needed reform that will pull capital into the United States and grow the economy. Thankfully, both bills cut the corporate rate on a permanent basis.
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