ConDig (27-Sept-17). Leaders of the US construction industry have given a tentative thumbs up to plans by President Donald Trump to initiate sweeping changes to the country’s tax code, including lowering individual and corporate taxes.
Under the Trump administration’s proposal, the corporate tax rate would be lowered nearly 15 points to 20% from a current rate of 35%.
The plan also includes a special income tax rate for “pass-through” businesses, which include partnerships and LLCs. These businesses whose profits “pass through” to their owners, would be taxed at a rate of 25% rather than the individual rate of their owners, under the current law.
It is estimated that about 95% of businesses in the US are structured as pass-throughs and they generate a majority of the government’s corporate tax revenue.
Michael D. Bellaman, president and CEO of Associated Builders and Contractors (ABC), said the association strongly backs tax reform and the plans released today were a “promising first step”.
“The framework and its targets go a long way toward advancing ABC’s tax policy goals. Construction historically faces the highest effective tax burden of any industry. The vast majority of construction firms are small and family-owned businesses that pay taxes at individual rates,” he said.
“The equivalent rate reduction envisioned in the framework for businesses on both sides of the code, paired with a broader tax base, moves toward ABC’s vision of fair treatment for all companies regardless of size, structure or sector.”
But he added that there was a long road ahead as Congress must first pass a budget resolution that instructs tax writers to turn this framework into legislative language.
Called the “Unified Framework For Fixing Our Broken Tax Code”, the plan is reported to cost upwards of $5 trillion dollars and is claimed to ease the tax burden on the middle class.
On the individual side, the plan aims to consolidate the tax brackets from seven to three, with the top rate going from 39.6% to 35%. The other brackets would be 25% and 12%.
Granger MacDonald, chairman of the National Association of Home Builders (NAHB), said the association welcomed the move by the Trump administration to make tax reform a top priority.
“By lowering the pass-through rate, the plan will reduce the tax bill of thousands of small businesses and help to spur job and economic growth. More importantly, the blueprint maintains the Low Income Housing Tax Credit, the most indispensable tool to help produce affordable rental housing. The plan also retains a business interest deduction for small businesses, which would ensure that our future tax code is truly pro-growth,” he said.
“On an issue of such significance, we recognize difficult trade-offs must be made. Although the mortgage interest deduction remains untouched, its effectiveness could be diminished as more families elect to take a higher standard deduction.”
But critics have said the plan does not contain full details about how to pay for the cuts without dramatically driving up federal deficits.
Last month, Trump signed an executive order to streamline the federal permitting process for construction of transportation, water and other infrastructure projects.