President Trump’s massive tax reform bill – adopted earlier this month on a 51-49 vote in the Senate – with all “yea” votes coming from Republicans — will soon be reconciled by the House and Senate into a bill acceptable to all members of Congress.
As the “Tax Cuts and Jobs Act” moves through the redrafting process, businesses leaders across the nation need to stay aware of what is happening—and how tax reform may affect their future planning.
To date, U.S. stock markets have rallied strongly on hopes that Washington would provide significant tax cuts for corporations.
“We have an opportunity now to make America more competitive, to keep jobs from being shipped offshore and to provide substantial relief to the middle class,” said Senate Majority Leader Mitch McConnell, R-Ky. Democrats have complained that last-minute amendments added to win over skeptical Republicans on the final vote were poorly drafted and vulnerable to being gamed later. “The Republicans have managed to take a bad bill and make it worse,” said Senate Democratic leader Chuck Schumer, (D-N.Y.). “Under the cover of darkness and with the aid of haste, a flurry of last-minute changes will stuff even more money into the pockets of the wealthy and the biggest corporations.”
With legislative reconciliation about to start, the House and Senate bills on the table would permanently lower the top corporate tax rate to 20% from its current 35% and repeal the corporate alternative minimum tax.
The House bill would allow businesses to immediately write off the costs of new equipment, rather than depreciating the value of these assets over time, but the provision would end after five years.
The Senate bill would also allow full expensing of capital investments for five years, but phase the change out by 20 percentage points a year thereafter. It would shorten the depreciation schedule for real property to 25 years. Section 179 expensing would be capped at $1 million, and the phase-out threshold would rise to $2.5 million.
The House would create a top pass-through rate of 25%. Owners of pass-through businesses – which include sole proprietorships, partnerships and S-corporations – currently pay taxes on their firms’ earnings through the personal tax code, meaning the top rate is 39.6%.
In addition, the Senate bill would create a 23% deduction for pass-through income – up from 17.4% in the original bill – subject to phase-out. Certain industries, including health, law and financial services, are excluded, unless household income is below $500,000 (for married couples filing jointly). To discourage people from recharacterizing regular wages as pass-through income, the deduction would be capped at half of the entity’s W-2 wages. The restriction would not apply to married couples with less than $500,000 in taxable income.
Among other changes approved in the early December vote:
Both the House and Senate bills would enact a deemed repatriation of overseas profits. Under the House bill, the rates would be 14% for cash and equivalents and 7% for reinvested earnings. Under the Senate bill, they would be 14.5% for cash and equivalents and 7.5% for reinvested earnings.
Watch this column for details as the reconciliation process continues.
Matéria originalmente publicada pelo jornal Valor Econômico ENGLISH VERSION BELOW O presidente do Grupo Oxford, Carlo Barbieri, acredita que o Brasil pode aproveitar o período de retomada das negociações(...)
Matéria originalmente publicada pelo Jornal Poder 360 ENGLISH VERSION BELOW A expectativa quanto ao sucesso do governo de Jair Bolsonaro em aprovar a reforma da Previdência não se restringe(...)
Matéria publicada originalmente na Revista Comex no Brasil ENGLISH VERSION BELOW Miami – Sob alerta de uma possível “tormenta” econômica mundial, anunciada pelo Fundo Monetário Mundial (FMI), a partir desta segunda-feira, em(...)