NSBA Weighs-in on Tax Framework

October 18, 2017

Lawmakers on Capitol Hill and interest groups in the tax community—including NSBA—have weighed in on the recently released tax reform framework from the “Big Six” Republican negotiating team, highlighting what we do– and don’t – want to see included in a yet-to-be-written tax reform legislative package.

On Sept. 27, the Trump Administration and Congressional Republican leaders released a nine-page “Unified Framework for Fixing our Broken Tax Code” that includes specific goals for lower business and individual tax rates. The Framework calls for a 20-percent corporate tax rate, a new 25-percent rate for certain pass-through business income, and international reforms that include a territorial tax system and a one-time mandatory repatriation tax. The Framework also would replace the current seven individual tax brackets with three brackets with rates set at 12 percent, 25 percent, and 35 percent, while leaving open the possibility of providing a fourth higher tax bracket for upper-income individuals to meet President Trump’s goal of ensuring that tax reform benefits the middle class and not the wealthy.

NSBA submitted a comment letter to the Big Six members, stating that we believe that the Framework contains the appropriate elements for a positive and constructive reform of our tax code—one that takes steps toward reducing the complexity of the tax system for businesses of all types while maintaining strong incentives for growth. However, we cited some specific and significant comments that we believe need to be addressed by lawmakers as they work toward filling in the critical details and move to a legislative package.

Among the key issues for small-business owners is lowering individual tax rates commensurate with corporate rate cuts. Congress should provide the same rate for all businesses whether organized as C corporations or pass-through entities, and Qualified Personal Service Corporation income should flow out at individual tax rates.

Furthermore, any legislation should allow businesses to immediately and permanently deduct the full cost of qualified capital investments, with interest deductibility for those with gross receipts under $10 million. As Congress debates what tax system should replace the current one, NSBA believes it is imperative that the U.S. moves towards a simpler, fairer tax system that does not attempt to only tweak one piece of the puzzle but instead is a permanent solution.

The Framework calls for the House and Senate tax committees to provide specific details of tax reform legislation and resolve many open issues. First, Congress must pass an FY 2018 budget resolution that is expected to provide reconciliation protections that would allow a tax reform bill to pass the Senate with a simple majority, instead of the 60 votes generally required. The budget resolution also is expected to specify how much of the tax cuts can be deficit-financed over the budget period, with the remainder having to be offset by eliminating or limiting current-law income tax deductions, preferences, and exclusions.

You can read the full NSBA comment letter HERE.

The full framework can be found HERE, and a one page overview can be found HERE.