Corporate rate changes proposed by the Senate and House in their tax reform plans

Posted on 01. Nov, 2017 by in 2017 Taxes, Tax

Capitol_unsplash_webOne of the first tasks in creating a combined version of the Senate and House tax proposals will be to agree upon the tax rates and tax brackets. The versions are within sight of each other in the range of rates, but the difference between four rates and seven creates a major distinction in the actual taxes assessed. The House plan ranges from 12% to 39.6%. The Senate version from 10% to 38.5%. The proposed changes in business taxes is an entire debate of its own and  creates a whole new series of complexities and discourse.

The reduction on taxes for small businesses could be beneficial, especially in the House version. Both versions lower the small business tax rate to 25%, 5% higher than the tax proposed for larger corporations, but potentially less than the maximum tax bracket of the owners. The House additionally proposes that the first $75,000 of business income would be taxed at 9% and phases up to the first $150,000 by 2022. Included would be sole proprietorships, partnerships, and S corporations. The Senate version eliminated deductions for supplies, home office expense, and legal fees but allows instead a 17.4% standard deduction.

Both versions lower the maximum corporate tax rate for C corporations from 35% to 20%. It is suggested that many larger corporations reduce their tax rate to 15%. There are a variety of other proposed changes to C corporation taxation.  There is great debate as to whether this will have any impact on bringing in cash held overseas, whether the changes will stimulate domestic investment by larger corporations, or, if it might cause stock prices to fall, increase the deficit, etc. There are about as many predictions as proposals. There does seem to be some agreement by research institutes that there is a very likely increase in the deficit and only a short term actual tax reduction that middle class families would see.


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