A Joint Statement on Tax Reform was released on July 27, 2017 by House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch (R-UT), and House Ways and Means Committee Chairman Kevin Brady (R-TX). The statement provides a very basic outline of the basic ideas that the “Big 6” (a reference to the above group that has cropped up in the tax press) have determined to attempt to include in the tax reform bill that Congress expects to begin work on shortly.
One key item of note in the joint statement is the abandonment of the border-adjustable tax, an item that had been a key component of the House GOP “Better Way” blueprint issued last year. The statement’s information on that provision reads as follows:
While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform.
The statement broad a broad outline, but few specifics, on items to be included in the program. The statement provides:
Above all, the mission of the committees is to protect American jobs and make taxes simpler, fairer, and lower for hard-working American families. We have always been in agreement that tax relief for American families should be at the heart of our plan. We also believe there should be a lower tax rate for small businesses so they can compete with larger ones, and lower rates for all American businesses so they can compete with foreign ones. The goal is a plan that reduces tax rates as much as possible, allows unprecedented capital expensing, places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas. And we are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base.
As always, the devil continues to be in the details—and those are yet to come. Some key details to be filled in include:
- What exactly will make up “tax relief for American families” at the heart of the plan
- Exactly how significant will the tax rate cuts be
- What will the definition be of a “small business” that qualifies for a lower rate
- What will the limits be on expensing and will it allow expensing for items currently not eligible for Section 179 treatment by small business taxpayers
We will continue to follow developments in this area and, if a law is passed, provide analysis of the law here as well as offering continuing education options to get professionals up to speed.