11/3/2017 5:00:00 AM/Categories: General News, Today's Top 5, Livestock, Grains
WASHINGTON (DTN) -- House Republicans released a long-awaited tax-reform and tax-cutting plan that lowers tax rates for corporations and families, but forces both businesses and families to give up or reduce some favorite long-standing tax breaks.
"This is a complete redesign of the (Tax) Code," said Rep. Kevin Brady, R-Texas, chairman of the Ways and Means Committee.
Brady's committee is set to mark up and debate the plan in committee starting next Monday.
Looking for a major legislative victory, President Donald Trump applauded the introduction of the bill. He noted his priorities are to bring tax cuts to the middle class, eliminate loopholes and slash business tax rates. The president warned of the coming effort to lobby against the legislation.
"The special interests will distort the facts, the lobbyists will try to save their special deals, and some in the media will unfairly report on our efforts," the president said. "But my Administration will work tirelessly to make good on our promise to the working people who built our nation and deliver historic tax cuts and reforms -- the rocket fuel our economy needs to soar higher than ever before."
The bill would cut the corporate tax rate from 35% to 20%, a foundation set early in the debate over tax reform. Businesses would get immediate expensing of capital costs, but business interest would be limited and other tax deductions and tax credits would go away.
For individuals and families, the bill cuts individual tax brackets from seven to four: 39.6%, 35%, 25% and 12%. The standard deduction would be doubled, but limit state and local tax deductions, as well as other items on the Schedule A. The Child Tax Credit would be boosted for families from $1,000 per child to $1,600. A special $300 tax credit would be added for people who take care of a parent or another non-child dependent.
The bill would limit mortgage interest deductions at $500,000. That prompted the National Association of Realtors and National Association of Home Builders to oppose the tax plan.
In a victory for farm groups who pressed on the estate tax, the bill doubles the estate-tax exemption to $11 million for individuals, up from $5.49 million. The estate tax is phased out entirely after 2023.
The American Farm Bureau Federation applauded Congress for releasing the plan. "This new tax plan moves us closer to a tax system that rewards the hard work and entrepreneurship of America's farm and ranch families," said AFBF President Zippy Duvall.
Duvall highlighted some of the details Farm Bureau supports. "Today's proposal includes expanded, immediate expensing while continuing the business interest deduction important to so many farmers and ranchers. It also provides immediate relief from the estate tax with a repeal to follow in subsequent years. We will be studying the plan to ensure the new rate structure reduces the tax burden of our nation's farmers and ranchers and gives them the flexibility they need to reinvest in their businesses."
Countering Farm Bureau's enthusiasm, the National Farmers Union stated the plan would increase burdens for family farmers and ranchers. Roger Johnson, president of NFU, said he and his members "adamantly oppose the overarching elements of this plan because they shift the nation's tax burden from the top earners in our country to the backs of American family farmers, ranchers and the middle class."
Johnson criticized the proposal to repeal the estate tax and the cuts for corporations and the wealthy. Further, Congress doesn't provide the offsets to avoid a $1.51 trillion increase to the national debt over 10 years.
Sen. Jeff Flake, R-Ariz., a thorn in the side of the president lately, spoke on the Senate floor about his concerns about the long-term impact of cutting taxes without reforming the Tax Code. Flake said the cuts would translate into a larger national debt down the road.
"If we are going to do cuts, cuts, cuts, we have got to do wholesale reform. With the national debt exceeding $20 trillion, we have got to take this seriously. Rate reductions have to be accompanied by real reform," Flake said. "We cannot simply rely on rosy economic assumptions, rosy growth rates to fill in the gap. We have got to make tough decisions. We cannot have cuts today that assume that we will grow a backbone in the out-years in terms of the real reforms that we're going to need," said Flake.
The Association of Equipment Manufacturers largely praised the introduction of the legislation as "taking an important step forward in achieving pro-growth, pro-manufacturing tax reform." AEM stated its members support permanent tax reform to simplify the code, lower rates for all businesses, and ultimately creates good-paying manufacturing jobs in America."
A group of businesses created a coalition called BUILD to protect interest expensing. The bill limits the business-interest deduction to smaller businesses and the deduction would be capped at 30% of adjusted gross taxable income. Carryforward of business interest will also be disallowed.
The BUILD group stated that limiting interest deductions "amounts to a new tax on American job creators who borrow to invest and grow. This policy change would harm the global competitiveness of businesses across all sectors of the U.S. economy, from manufacturing, to agriculture, to telecommunications and broadband."
The National Council of Famer Cooperatives had warned last week that eliminating the deduction for domestic production activities would translate to $2 billion in lost tax breaks for farmers. Still, the deduction is eliminated in the bill.
The National Biodiesel Board stated its members "are disappointed in this first draft" of the legislation because it does not include an extension of biodiesel tax incentives. NBB added it would work with Congress "to craft a robust, biodiesel tax incentive."
In an area that could becoming a sticking point for farmers with high property-tax bills, the legislation limits the state and local-taxes deduction, capping them at $10,000.
National Conference of State Legislatures President and South Dakota state Sen. Deb Peters, a Republican, said, "This is an attack on the sovereignty of the states. We are opposed to the modification, which is essentially an elimination of the state and local tax deduction (SALT)."
Peters continued, "SALT is one of the six original federal tax deductions and has been a staple of the federal tax code and the state-federal fiscal relationship for over 100 years. We will continue to fight for the more than 43 million Americans who claim this deduction every year."
The full bill can be viewed at https://waysandmeans.house.gov/…
A summary of the bill can be found at https://waysandmeans.house.gov/…