The Tax Bill: Why It’s Important to You, Your Company and Your Employees
Monday, November 6, 2017
Posted by: Alyce Ryan
Most business and manufacturing groups have jumped on the House Republican Tax Plan released last week, saying the 429-page bill, called "Tax Cuts and Jobs Act,” will be a boon to investment and job creation.
Jay Timmons, President and CEO of the National Association of Manufacturers (NAM), called the plan a "grand slam for hardworking manufacturers and the US economy,” adding that the bill provides a "guaranteed path to surge investment, jobs and economic growth.”Michael Makin, President of Printing Industries of America (PIA), a partner organization in our annual "Print & Packaging Legislative Summit,” called it a "big deal” for print.
The bill includes a broad set of proposed changes to the corporate and individual tax system. For businesses in particular, there are many favorable provisions:
According to NAM’s most recent Manufacturers’ Outlook Survey, most manufacturers would expand investment, hire more workers and increase employee benefits if the tax reform measure as presented is passed.
- Corporate tax cut will be immediate and permanent. The cut to 20% from the current 35% will is designed to be permanent.
- Immediate expensing of business investments: Companies can deduct the cost of business investments from their tax bill in the year that they make them instead of spreading it out over multiple years.
- Elimination of the estate tax. The threshold for the tax, which applies only to estates with greater than $5.6 million in assets during 2018, would double to over $10 million. Then, the plan would phase out the tax after six years. The Senate GOP appears to be mulling preserving at least part of the tax.
- A 25% rate for pass-through businesses. Instead of getting taxed at an individual rate for business profits, people who own their own business would pay at the so-called pass-through rate. There will be some guardrails on what kinds of businesses can claim this rate, to avoid individuals abusing the lower tax.
- Preserves deductibility of advertising expenses for businesses, thus ensuring that point-of-purchase and printing expenditures will remain a tax-deductible business expense.
When presented with a "what would you do?” scenario, 64.7% of manufacturers said they would increase capital spending; 64.3% said they’d expand their business; 57.3% said they’d hire more workers and 52.2% said they’d increase employee wages and benefits.
Benefits for Individuals
In addition to the business tax benefits cited above, the proposed bill also reforms taxes for individuals, as follows:
- It creates new individual tax brackets: New individual tax brackets:.
- 12%: Applies to incomes up to $45,000 for an individual and $90,000 for a married couple
- 25%: Applies to incomes up to $200,000 for and individual and $260,000 for couples.
- 35%: Applies to incomes up to $500,000 for an individual and $1 million for couples.
- The highest tax bracket would remain at 39.6% for high-income taxpayers.
- A change to the state and local tax deduction. The bill allows taxpayers to deduct state and local property taxes up to $10,000 but not income or sales
- Increase in the size of the child tax credit. The tax bill increases the child tax credit to $1,600 from $1,000.
- Limiting home-mortgage-interest deduction. On new-home purchases, interest on loans up to $500,000 would be deductible, down from the current limit of $1 million.
- A larger standard deduction. The standard deduction for all taxes would increase to $12,000 for individuals (up from $6,350) and $24,000 for married couples (up from $12,700).
- Elimination of most personal itemized deductions and many credits. The only deduction preserved explicitly in the plan is for charitable gifts and home-mortgage interest. Some of these include:
- Elimination of the student-loan-interest deduction: The amount paid toward student loan interest can currently be deducted.
- Elimination of the medical-expense deduction: Under current law, individuals who spend over 10% of their income on medical expenses are allowed to deduct part of those costs from their taxes. The proposed new bill would remove that deduction.
- Elimination of the moving deduction: This allows anyone who moved to a new home in the past year to deduct moving expenses.
- Elimination of alimony-payment deduction.
- Repeal of the alternative minimum tax (AMT). The tax, which forces people who qualify because of an outsized number of deductions, would be eliminated under the legislation.
Engage your employees in this discussion.
In order to help make the case to Congress that tax reform is necessary, it is important to engage your employees in this discussion. We need to encourage our member companies to help their employees understand why it’s important that our outdated tax system is fixed. AICC has adapted the National Association of Manufacturers’ (NAM) talking points for your employees, and these are available here.
For more information, contact Steve Young at AICC headquarters, firstname.lastname@example.org.