Republican tax plan takes aim at corporate rate
The tax overhaul proposed by House Republicans on Thursday would slash the corporate tax rate from 35 percent to 20 percent — a move backers said would free up cash for companies to create jobs.
President Trump praised the proposed cuts as “the rocket fuel our economy needs,” saying it would also encourage businesses to move operations and overseas profits back to the United States.
“We are just getting started, and there is much work left to do. The special interests will distort the facts, the lobbyists will try to save their special deals, and some in the media will unfairly report on our efforts,” Trump said.
“But my administration will work tirelessly to make good on our promise . . . and deliver historic tax cuts and reforms, the rocket fuel our economy needs to soar higher than ever before.”
The plan, which still must be approved by the full House and Senate, would:
Lower the top rate for noncorporate “pass-through” businesses from 39.6 percent to 25 percent.
Preserve the research and development tax credit to encourage businesses to develop innovative products and services, creating jobs in the process.
Make it easier and far less costly for American businesses to bring home foreign earnings to invest in creating jobs.
Prevent jobs, company headquarters and research operations from moving overseas by eliminating incentives that reward them for doing so.
Republicans argue that cutting tax rates for businesses improves economic competitiveness and puts the US corporate tax rate in line with that of other countries.
Under the proposal, businesses would not be allowed to deduct some executive compensation above $1 million, which they can do now for performance-based pay, the Wall Street Journal reported.
And while the plan sets a top 25 percent rate for pass-through businesses like family-owned businesses or partnerships, it includes safeguards that would prevent people from turning wage income taxed at up to 39.6 percent into business income taxed at the lower rate.
The new one-time tax on overseas profits would be set at 12 percent for cash and 5 percent for nonliquid holdings, a provision meant to force companies to bring overseas profits back to the US.
While major corporations have backed an overhaul, the National Association of Realtors and the National Association of Home Builders have criticized the bill for its proposed changes to tax provisions dealing with the real estate industry.
And the top lobbyist for small businesses, the National Federation of Independent Business, says the plan “leaves too many small businesses behind.”
Too many small businesses taxed at individual rates up to the top 39.6 percent won’t benefit from the new 25 percent top tax rate because of the GOP’s safeguards, the group argues.
David French, the National Retail Federation’s chief lobbyist, praised the plan, saying it would put more money into the hands of middle-class shoppers and that retailers would benefit from the new 20 percent business rate.
“The Ways and Means Committee got it almost perfect in terms of middle-class and corporate tax reform,” French told Bloomberg News.
“We’re going to encourage members to enthusiastically support this bill.”
There would also be a new 1.4 percent tax on public and private endowments, a provision sure to cause controversy because of its effect on colleges and other institutions.
With Post wires