On February 7, 2017, Steve Moyer, Tax Director here at Canon Capital, was invited to attend the Bloomberg BNA 2017 Outlook on Tax Reform in Washington, DC. The keynote speaker at the conference was Kevin Brady, US Congressman and Chairman of the House Ways and Means Committee, the main tax-writing arm of the US Government. Congressman Brady spoke about the House plan, “A Better Way,” for tax reform and highlighted the key aspects of the plan, along with the proposed timing for this new Bill.
This new tax bill would be the most sweeping tax reform we have seen in the last thirty years. The last major tax reform legislation of this magnitude was the Tax Reform Act of 1986, signed into law by President Ronald Reagan. Some of the same motivations to reform the tax code thirty years ago are again at the forefront of tax reform today: the desire to simplify the Code, make it fairer, and to flatten the tax brackets. Congressman Brady spoke on the vision for making the code simpler and fairer, lowering the tax rates for both individuals and businesses, and creating a new IRS that would put taxpayers first.
The current individual tax rates include seven tax brackets with the maximum tax bracket exceeding 40%. Under the “Better Way,” the brackets would be consolidated into three brackets of 12%, 25%, and 33%, along with eliminating many of the complexities including the burdensome Alternative Minimum Tax (AMT), but would provide a much larger standard deduction amount. The plan also will reward savings, streamline the college educational benefit, and encourage giving to charities. To encourage business and jobs growth in the US, the Corporate tax rates will be reduced from a high of 35% to a rate of 20%, eliminating many of the special interest deductions currently in place. In addition, for the many small businesses in the US that do not operate as “C” Corporations, the maximum tax rates will be reduced to 25% from those that currently can exceed 40%.
So when will this tax bill be introduced? Congressman Brady was asked this question during his talk, and he replied, “Tax reform will take place in 2017.” He went on to say that the bill is currently being worked on and should be introduced in the next several weeks, with the hopes of it being passed during the summer of 2017. Will the bill be retroactive to the beginning of 2017 or a later start date? This will probably be determined by how quickly the bill will be introduced and how soon it would be passed into law.
Many of the pieces in the House tax proposals are very similar to what President Trump introduced as he was running for office. Several days after attending this conference, President Trump announced that he would introduce some news on tax reform in the next several weeks. The stock market reacted favorably, jumping to an all-time high. We will keep you informed as more information becomes available.
Steve related the following about his experience attending this event, “I was honored to be invited and attend this exclusive news event in Washington, DC and sponsored by BNA. It is not often you get a front row seat to hear directly from the writer of the tax policy.”
As always, if you have questions about the upcoming tax proposals, we are happy to help. Contact us or call 215-723-4881.