Home | Print Page | Contact Us | Sign In | Register
Weekly Industry News
Blog Home All Blogs
Search all posts for:   

 

View all (1579) posts »
 

Taxes — What’s Next?

Posted By Administration, Tuesday, December 5, 2017

PIA National supports a clear and simple tax code. The association wants a reduction of individual and corporate income tax rates for small businesses. PIA National opposes tax provisions and regulations that impede small business growth.

The question is will PIA get its wishes with the tax reform plans of the Senate and the House and after a conference committee finishes its work on a final plan.

There are differences in the two plans and billions of dollars involved. Both reduce the corporate tax rate from 35% to 20%. The House corporate tax plan starts next year. The Senate’s waits until 2019.

Then President Trump threw a monkey wrench into that and said he’d support a corporate tax rate of 22%.

One of the biggest — and most troubling for Republicans — difference is the Senate bill reducing the hated alternative minimum tax while the House does away with it completely. Another issue is the estate tax. The House does away with it and the Senate plan scales the tax back.

Another whopping problem? ObamaCare. The Senate plan removes the individual mandate. The House left it alone. A key Senate vote was from Maine Rep. Susan Collins who supported the individual mandate deletion because she was promised the Senate would pass the bipartisan agreement of Sen. Lamar Alexander and Sen. Patty Murray to continue to fund the cost sharing reductions (CSR) for insurance companies.

It turns out that promise may not happen.

Senate Majority Leader Mitch McConnell and Speaker of the House Paul Ryan are convinced they can get this all wrapped up as a Christmas gift to President Trump. “We’ll be able to get to an agreement. I’m very optimistic about it. And we think this will make a big difference in getting our economy moving again and providing jobs and opportunity for the American people,” McConnell said.

The biggest problem with both versions from a small business — and PIA standpoint — is what the reforms will do to pass-through businesses. Those businesses range in size from the very small single person company that runs out of a home or a garage to larger films like real estate companies or even sports teams. The income from those businesses is passed through the owner who pays taxes on it as an individual.

Stephan Sykes owns PlusMinus Accounting in Oregon City, Oregon. Last week he told Weekly Industry News that the pass-through plans in both versions are not good.

“It is bad for small business since 80% of all businesses are S Corps. They’re going to take a big hit. However, as an accountant, the first question I always ask when people talk taxes or tax reform is where is the loop hole? There is one here and it’s that you’ll want to convert your S Corp — or your pass through entity — into a C corporation,” he said. 

If things stand as they do now, Sykes said this might even be a good thing for pass-through businesses who incorporate.

“If they lower the corporate tax rate, and if they lower capital gains, or more importantly, if they put zero tax on dividends, that will be great for small business. If a business doesn’t convert to a C Corp then they will pay substantially more. In fact, they’ll pay about 15.3% more because they’re going to make it subject to Social Security tax. If you have $100,000 pass through income then $15,000 is what it’s going to cost. Right now it’s zero,” Sykes concluded. 

One of the worries is the $1 trillion it adds to the deficit and that ties to concerns about the expiration of the tax cuts by 2025 which will impact individuals and families and especially individuals and families with lower incomes.

White House budget director Mick Mulvaney said critics need not worry. He believes future Congress’ will extend them. “The Bush tax cuts were the same way, and most of them didn’t expire. We’ve said before and we’ll say it again, if it’s good policy, it will be permanent. If it’s bad policy, it will be temporary,” Mulvaney said.

And what do we — the people — think of the two plans? Not much says a recent HuffPost/YouGov survey. Taken just a few days before the Senate vote:

 

  30% of us support the plan

  39% are against

  30% aren’t sure

  Those voting for Donald Trump — 75% support

  Those voting for Donald Trump — 8% oppose

  Those voting for Hilary Clinton — 7% support

  Those voting for Hilary Clinton — 82% oppose

 

Here’s a look at all the tax brackets and how they affect you.

 

How income groups are impacted:

 

Average for all income groups

 

  A tax cut of $1,260

  76.3% of us will see a cut

  8.5% will see a tax increase

 

                Income                                                       % Getting a Cut or a Hike

$0 to $25,400 — Gain $50                                     52.8% cut — 1.5% taxes raised

$25,400 to $49,600 — Gain $330                         85.4% cut — 5.1% taxes raised

$49,600 to $87,400 — Gain $850                         87.9% cut — 10.8% taxes raised

$87,400 to $150,100 — Gain $1,430                   83.6% cut — 16.0% taxes raised

$150,100 to $217,800 — Gain $2,230                 82.1% cut — 17.7% taxes raised

$217,800 to $308,200 — Gain $3,130                 79.6% cut — 20.4% taxes raised

$308,200 to $746,000 — Gain $11,610               92.9% cut — 7.1% taxes raised

Over $746,000 — Gain $34,130                           86.0% cut — 14.0% taxes raised

 

How every income group is affected in 2027 when compared to current tax law:

 

Average for all income groups

  A tax hike of $340

  50.3% will see a tax hike

  28% will see a tax cut

 

$0 to $28,100 — Gain $10                                     11.8% cut — 32.4% taxes raised

$28,100 to $54,700 — Gain 0                               24.7% cut — 56.0% taxes raised

$54,700 to $93,200 — Loss $50                           27.5% cut — 65.5% taxes raised

$93,200 to $154,900 — Loss $150                      32.2% cut — 58.9% taxes raised

$154.900 to $225,400 — Loss $340                    44.3% cut — 54.0% taxes raised

$225,400 to $304,600 — Loss $560                    57.1% cut — 41.6% taxes raised

$304,600 to $912,100 — Loss $2,010                 63.9% cut — 35.4% taxes raised

Over $912,100 — Loss $32,500                           83.0% cut — 16.8% taxes raised

 

Tax brackets for single filers

 

Current law

10% — $0 to $9,325

15% — $9,326 to $37,950

25% — $37,951 to $91,900

28% — $91,901 to $191,650

33% — $191,651 to $416,700

35% — $416,701 to $418,400

39.6% — $418,401 and over

 

Standard deduction — $6,350

Personal exemption — $4,050

 

House tax plan

12% — $0 to $45,000

25% — $45,001 to $200,000

35% — $200,001 to $500,000

39.6% — $501,000 or more

 

Standard deduction — $12,200

Personal exemption — eliminated

 

Senate tax plan

10% — $0 to $9,525

12% — $9,526 to $38,700

22% — $38,701 to $70,000

24% — $70,100 to $160,000

32% — $160,001 to $200,000

35% — $200,001 to $500,000

38.5% — $500,001 and more

 

Standard deduction — $12,000

Personal exemption — eliminated

 

Tax brackets for married

 

Current law

10% — $0 to $18,650

15% — $18,651 to $75,900

25% — $75,901 to $153,100

28% — $153,101 to $233,350

33% — $416,701 to $418,400

39.6% — $418,401 and more

 

Standard deduction — $6,350

Personal exemption — $4,040

 

House tax plan

12% — $0 to $90,000

25% — $90,001 to $260,000

35% — $260,001 to $1,000,000

39.6% — $1,000,001 and more

 

Standard deduction — $24,400

Personal exemption — eliminated

 

Senate tax plan

10% — $0 to $19,050

12% — $19,501 — $77,400

22% — $77,401 — $140,000

24% — $140,001 to $320,000

32% — $320,001 to $400,000

35% — $400,001 to $1,000,000

38.5% — $1,000,001 and more

 

Standard deduction — $24,400

Personal exemption — eliminated

 

Source links: The Washington Post — link 1, link 2, The Huffington Post, MSN — link 1, link 2

Tags:  Insurance Content  Insurance Industry  Insurance News  Taxes — What’s Next?  Weekly Industry News 

Share |
Permalink | Comments (0)
 

A special thank you to our KKlub Members for their support.