Republicans’ victory in taking control of both the House and Senate in Tuesday’s midterm election may spell good news for business owners hoping to see tax relief in coming years.
Many business groups have been pressuring Congress and President Obama to enact business tax reforms, such as lowering the United States' corporate tax rate and streamlining tax rules for small-business owners. Now that Republicans control both chambers of Congress, many business advocacy groups are hopeful that such measures will be high on Republicans’ agenda.
“Tax reform, tax reform and tax reform,” John Engler, president of the Business Roundtable, said when asked Tuesday about the top priorities of his group, according to The Wall Street Journal.
Corporate executives have complained that U.S. corporate tax rate, which is 35% on the federal level, is the highest in the developed world. Moreover, the U.S. government levies the tax on corporate profits earned abroad while many other countries only charge for corporate profits within their borders. These factors have led to a large number of “corporate inversions” in recent years—a controversial move in which companies buy a foreign company and move their headquarters abroad to minimize U.S. taxes.
Republican leaders in the new Congress are expected to push forward corporate tax reform measures, in part because they think President Obama will agree with them: In 2013, the president presented a plan to reduce the U.S. corporate tax rate to 28 percent while doing away with many corporate tax loopholes. But his plan never gained steam in Congress.
There is also good reason to believe that small-business tax reform will be high on Republicans’ agenda. The vast majority of small-business owners don’t pay corporate taxes, rather their business income flows through their individual taxes. Rep. Dave Camp (R-Michigan) introduced a small-business tax plan in March 2013 intended to simplify tax and accounting rules and a more sweeping tax plan that included many of those measures earlier this year. Some people believe that plan could come back on the table now that Republicans control Congress.
But not everyone is convinced that Republicans will be able to pull off business tax reform. William G. Gale, co-director of the Urban-Brookings Tax Policy Center, writes that he still thinks it’s a longshot, despite all the political banter. He says there are too many divisive issues between Democrats and Republicans over business tax reform—not to mention that Republicans still don’t have a veto-proof majority in Congress. Gale writes on Brookings.edu:
Given that prospects for tax reform were virtually nil before the election, the Republican recapture of the Senate has to have made prospects for tax reform better. But I still have the strong sense that tax reform will be a tough slog in the next Congress.
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