Trump Tax Plan Could Boost Small Businesses

September 29th, 2017 by Trey Barrineau

This week, President Trump unveiled his plan to completely overhaul the U.S. tax system. The proposal features many items that could help small businesses, including those that manufacture, distribute and install doors and windows.

“This will be the lowest top marginal income tax rate for small and midsize businesses in this country in more than 80 years,” Trump said on Wednesday when he announced the plan.

Large corporations would see the corporate tax rate fall from 35 percent to 20 percent, which is below the 22.5-percent average of the industrialized world. Trump says it will help keep America competitive in the global economy. That’s a position that’s favored by the Window and Door Manufacturers Association (WDMA).

“WDMA supports tax reform policies that place manufacturers on an equal playing field with foreign competitors and equitable tax treatment of window, door and skylight manufacturers that protects the ability to provide quality jobs in the manufacturing sector,” the association says in a policy statement on its website.

However, another Trump proposal could bring a bigger benefit to smaller businesses, which make up the vast majority of door and window operations in the U.S.

The White House tax plan would create a 25 percent tax rate for so-called pass-through businesses, most of which are set up as sole proprietorships or partnerships. In 2014, about 95 percent of the 26 million businesses in the U.S. were considered pass-throughs, according to the Brookings Institution. They’re called that because the income they generate “passes through” directly to their owners, who are then taxed under the individual income tax system.

Another part of the plan would allow businesses to immediately write off the cost of new investments in depreciable assets other than structures made after September 27, 2017, for at least five years.

“This policy represents an unprecedented level of expensing with respect to the duration and scope of eligible assets,” the plan reads. “The committees may continue to work to enhance unprecedented expensing for business investments, especially to provide relief for small businesses.”

As for individuals and their taxes, there’s more potential good news in the administration’s proposal.

Trump’s plan would cut the number of tax brackets from seven to three, with tax rates of 12 percent, 25 percent and 35 percent. (Currently, the highest rate is 39.6 percent and the lowest rate is 10 percent.)

It would also double the standard deduction to $12,000 for individuals and to $24,000 for married couples filing jointly. For most people, that would eliminate the need to claim a confusing number of itemized deductions or tax credits. However, the popular mortgage-interest deduction and deductions for charitable giving would remain, as would incentives for retirement savings plans.

The estate tax and the alternative minimum tax would also go away under the plan.

“This is a revolutionary change, and the biggest winners will be the everyday American workers as jobs start pouring into our country, as companies start competing for American labor and as wages start going up at levels that you haven’t seen in many years,” Trump said.

Pro-business organizations expressed support for the president’s proposal.

“Tax reform will help families who are struggling to make ends meet and employers who want to grow their business and create new jobs,” said  U.S. Chamber of Commerce president and CEO Thomas J. Donohue. “The U.S. Chamber is pleased to see consensus among congressional leaders and the administration on a plan that will kick-start long overdue reform.”

“We are grateful to the president and congressional leaders for remaining steadfast on tax reform,” National Federation of Independent Business president and CEO Juanita Duggan said in a statement. Her organization represents 325,000 small businesses in all 50 states and Washington, D.C.  “We are pleased to see that the initial plan calls for reducing taxes on pass-through companies, which represent the overwhelming majority of American small businesses.”

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