Thanks to Mark Sanchez and MiBiz for discussing this ongoing, ever-changing topic and for featuring the comments of our own Phil Mitchell.
The reform proposal rolled out by Republicans in Congress to rewrite the U.S. tax code creates the proverbial winners and losers, sources say.
Corporations could benefit from a proposed lower flat tax rate and a one-time ability to repatriate cash back into the U.S. from foreign earnings. Many small businesses could benefit as well, although one trade association in Washington, D.C. offered early opposition to the proposal because it “leaves too many small businesses behind.”
“We believe that tax reform should provide substantial relief to all small businesses, so they can reinvest their money, grow, and create jobs,” National Federation of Independent BusinessPresident and CEO Juanita Duggan said in a statement Thursday after the tax reform proposal was released.
The proposal includes a new 25-percent tax rate for small business owners, sole proprietors and partnerships — or so-called “pass-through entities” — who report their business income on their personal tax returns.
The proposal could reduce the federal tax burden for small business organized as S-corps, sole proprietorships or partnerships, depending on their income level, said Phil Mitchell, president of accounting firm Kroon & Mitchell Certified Public Accountants LLC in Grand Rapids. However, the proposal has a provision that would exclude professional service providers with higher incomes — doctors, lawyers, financial professionals — which drew the objections of the NFIB.
That opposition illustrates the difficulty in rewriting a complex U.S. tax code that offers a vast array of deductions, and “everyone has their own vested interests” that will oppose its elimination, Mitchell said.
“There’s going to be winners and losers of who’s negatively impacted and who’s positively impacted,” Mitchell said. “Everyone’s got their own little horse in the race. That’s the challenge.”