As the new administration and Congress get to work, tax reform is high on the agenda. Although legislative language has not yet been released, statements from tax writers in Congress shed some light on various proposals.
House Ways and Means Chair Kevin Brady, R-Texas, has predicted that tax reform will lower the tax rates for all businesses. “We are proposing a corporate rate of 20 percent and for small businesses, a top rate of no more than 25 percent,” Brady said. As for the timeline of tax reform, Brady said that tax reform legislation will be unveiled in the “coming months.” Senate Finance Committee Chair Orrin Hatch, R-Utah, has said that the Senate will work through its own tax reform process. “No one should expect the Senate to simply take up and pass a House tax reform bill,” Hatch said. Hatch added that Senate tax writers are in the early stages of drafting a tax reform proposal. Hatch did not provide details of the proposal but said that House and Senate Republicans generally agree on basic principles, such as lower tax rates for individuals and businesses.
One area of potential friction is the House GOP’s so-called “border adjustability” proposal. Hatch has questioned whether the border adjustment proposal, essentially taxing imports but not U.S. exports, is “in line with international trade obligations” and whether “adjustments would need to be made to prevent shifting a tax burden onto specific industries.” Democrats, although in agreement that the tax code is in need of reform, have been critical of Republicans’ proposed solutions as appearing to focus on tax cuts for the wealthy. “They (Republicans) are for trickle-down economics…giving tax breaks to the wealthy, it trickles down and if somebody gets a job, that’s great, if they don’t, so be it,” House Minority Leader Nancy Pelosi, D-Calif., said. “You don’t receive economic security by tossing the rich even more tax breaks,” she added.
Affordable Care Act
The Affordable Care Act (ACA) included a host of tax-related provisions. The ACA created the net investment income (NII) tax, the additional Medicare Tax, an excise tax on certain medical devices, and more. The ACA also imposes shared responsibility requirements on individuals and employers (known and the individual and employer mandates). Although President Trump and Republicans in Congress have called for repeal and replacement of the ACA, it is not clear at this time whether repeal includes the ACA’s tax provisions. Hatch said that all of the ACA’s taxes “need to go.” The timeline for Congressional action on the ACA is expected to be known soon. Note: Changes to the ACA are still pending.
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