The complete overhaul of the U.S. tax system proposed this week by the administration could help small businesses such as those offer auto glass repair and replacement services.
Large corporations would benefit from the plan to cut the corporate tax rate from 35 percent to 20 percent, below the 22.5-percent average of the industrialized world.
However, another Trump proposal could bring a bigger benefit to smaller businesses, which make up the vast majority of AGRR operations in the U.S.
The tax plan would create a 25 percent tax rate for so-called pass-through businesses, most of which are set up as sole proprietorships or partnerships. In 2014, about 95 percent of the 26 million U.S. businesses were considered pass-throughs, according to the Brookings Institution. They’re called that because the income they generate “passes through” directly to their owners, who are then taxed under the individual income tax system.
Another part of the plan would allow businesses to immediately write off the cost of new investments in depreciable assets other than structures made after September 27, 2017, for at least five years.
“This policy represents an unprecedented level of expensing with respect to the duration and scope of eligible assets,” the plan reads. “The committees may continue to work to enhance unprecedented expensing for business investments, especially to provide relief for small businesses.”
The plan also proposes cutting the number of tax brackets from seven to three, with tax rates of 12 percent, 25 percent and 35 percent. (Currently, the highest rate is 39.6 percent and the lowest rate is 10 percent.)
It would also double the standard deduction to $12,000 for individuals and to $24,000 for married couples filing jointly. Mortgage-interest deductions and deductions for charitable giving would remain, as would incentives for retirement savings plans.
The estate tax and the alternative minimum tax would also go away under the plan and deductions for state and local taxes paid. This move is expected to be unpopular in heavily-taxed states such as New York, California and Illinois.
“Tax reform will help families who are struggling to make ends meet and employers who want to grow their business and create new jobs,” said U.S. Chamber of Commerce president and CEO Thomas J. Donohue. “The U.S. Chamber is pleased to see consensus among congressional leaders and the administration on a plan that will kick-start long overdue reform.”