For the past many years, there has been a steady stream of proposals regarding tax reform coming from Washington, D.C. Up until now, the proposals all had one thing in common: they had no chance of being enacted due to opposing views held by the House, Senate and the President. In fact, the last significant round of tax changes came with the Taxpayer Relief Act of 2012, and that only happened because Congress and the President were forced to deal with some major expiring tax provisions, aka “the fiscal cliff”.
But now it’s time to pay attention. With the House, Senate and Presidency under Republican control, it is very likely that we will see significant tax changes and maybe even some broader tax reform in 2017. And there’s a common theme for tax policy among the Republican Congress and President-elect Trump: lower the top tax rates for businesses and individuals.
The President-elect and the House of Representatives’ “Tax Reform Blueprint” both propose to lower the top tax rate on individuals to 33%. Also, both agree on reducing business taxes. The House Blueprint would cap the tax rate on business income at 25%. The President-elect wants to reduce the top tax rate on C-corporations to 15%. There also appears to be some areas of agreement on international tax reform, which might include some incentives for corporations to repatriate foreign earnings at favorable rates.
In summary, faced with the likely prospect of lower taxes in 2017 or 2018, taxpayers should be thinking about methods to defer income (from 2016 to later years) and accelerate deductions. And pay close attention to the tax proposals coming out of Washington D.C. It will be interesting and things could move quickly.