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Small Business and Trump Administration Tax Proposal

What's Hot in Small Business – Chris Crum
Chris Crum writes for Small Business Resources about what's new for small business. Chris was a featured writer with the iEntry Network of B2B Publications where hundreds of publications linked to his articles including the Wall Street Journal, USA Today, LA Times and the New York Times.

Small Business and Trump Administration Tax Proposal

Small Business and Trump Administration Tax Proposal

In late September, the Trump Administration revealed the new tax reform framework it developed with the House Committee on Ways and Means and the Senate Committee on Finance. The administration describes it as a "unified framework to achieve pro-American, fiscally responsible tax reform" that is "built for growth, supports middle-class families, defends our workers, protects our jobs, and puts America first."

An official document outlining the highlights of the framework says it will lower rates for individuals and families, double the standard deduction, significantly increase the child tax credit, eliminate loopholes for the wealthy, repeal the death tax and alternative minimum tax, and create a new lower tax rate and structure for small businesses. The plan also promises to create jobs, promote competitiveness, and lower the corporate tax rate, while "bringing profits back home."

According to the document, the framework limits the maximum tax rate for small and family-owned businesses to 25% and reduces the corporate tax rate to 20%. Businesses would be able to immediately write off the cost of new investments. The administration claims the plan would level the playing field for American companies and workers.

Businesses have largely been supportive with some critics advocating modifications.

The National Federation of Independent Business said, “We are grateful to the President and Congressional leaders for remaining steadfast on tax reform. We are pleased to see that the initial plan calls for reducing taxes on pass-through companies, which represent the overwhelming majority of American small businesses. This is the beginning of a long process, and we look forward to more details. NFIB will remain engaged to ensure that tax reform starts with small business. Small businesses need meaningful reform that lowers their tax bill, allows them to invest in their business, create jobs, and grow the economy.”

Maxine Turner, Chair of the U.S. Chamber Council on Small Business, reinforced the importance of tax reform at their annual Small Business Summit: “We've been waiting for tax reform for a long time. It's important that it happens. If Congress gets tax reform done, I think it’s going to be a tremendous boost to this country. Small business has been on hold for way too long.”

Despite the plan's promise to close loopholes for the wealthy, critics believe it will have the opposite effect. Under the plan, sole proprietors would be taxed differently.

AP business writer Joyce Rosenberg says, “The proposal would change the way some company owners — sole proprietors, partners and owners of what are called S corporations — are taxed. They report business income on their individual 1040 forms and under current law, can be taxed at a rate up to 39.6 percent. Many small business advocates have long objected to the fact that some of these owners pay a higher tax rate than corporations whose rates currently top out at 35 percent. Under the GOP proposal, the tax rate on the businesses known as pass-throughs would be 25 percent. The corporate rate would be 20 percent."

Critics would like to see that gap closed, and some have expressed concern that this would indeed create a loophole for the wealthy.

The passing of the proposal into law is certainly not guaranteed, as it will have to make its way through Congress, though it has the support of GOP leaders. The President will be making speaking appearances promoting it.

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