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President Obama recently said that he wants a tax reform/deficit reduction package by August, and lawmakers now have many proposals to consider, including House and Senate blueprints as well as the Simpson-Bowles Plan. Whatever is adopted, it is sure to impact your tax strategy and planning.
All of the proposals have one common goal: reduce the federal government’s approximate $16 trillion federal budget deficit. Many of the plans propose to cut spending and raise revenues. Let’s take a look at how some of the tax proposals would affect individuals, businesses and others.
President Obama says he supports lowering the corporate tax rate in exchange for businesses giving up unspecified tax preferences. These could include tax incentives for fossil fuels, the Code Sec. 199 deduction and more. The House blueprint would reduce the top corporate tax rate to 25 percent, paid for by tax savings elsewhere. The Simpson-Bowles plan also calls for a reduction in the corporate tax rate, contingent on businesses relinquishing unspecific tax preferences.
President Obama and the House and Senate budgets also propose a number of incentives to encourage business spending and job creation, including:
Another key difference among the competing proposals: the House budget plan would repeal the Patient Protection and Affordable Care Act, including all of its business tax-related provisions, such as employer-shared responsibility provisions, the medical device excise tax, and more. The Senate approved a non-binding resolution to repeal the medical device tax but is not expected to go along with repeal of the entire Affordable Care Act.
In May, the Senate is expected to approve the Marketplace Fairness Act (H.R. 743). The bill gives states the authority to compel online merchants, no matter where they are located, to collect sales tax at the time of a transaction. However, states would be able to compel collection of sales tax only after they have simplified their sales tax laws, such as by adopting the Streamlined Sales and Use Tax Agreement. The bill has the support of President Obama. However, the bill may not pass in the House, where many lawmakers view it as a tax increase.
Tax reform coupled with deficit reduction is starting to gain momentum. Whether this will lead to legislation this summer or before year-end is unclear. As long as the key players continue their discussions, there is the chance of tax reform.
Doeren Mayhew will keep you posted of developments. In the meantime, please contact our Michigan CPAs, Houston CPAs or Ft. Lauderdale CPAs with any questions about how reform might impact you personally.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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