The Trump Administration and the Republican Congress have been focused for months on changing or repealing the Affordable Care Act (ACA). With that issue now in question, they have set their sights on making sweeping changes to the U.S. tax code. The result may be the most important tax bill in more than 30 years.
IMA® (Institute of Management Accountants) conducted a survey of senior finance professionals in May 2017 asking how they feel about the proposed changes being considered.
CUT THE CORPORATE RATE
One of the most aggressive administration proposals is cutting the corporate tax rate from 35% to 15% to spur economic growth and be more consistent with other industrialized countries. Overall, the proposed cut is favored by two-thirds of the survey respondents. Those from smaller firms (less than $101 million in revenues) were more likely to strongly favor lowering the tax rate than larger firms (44% vs. 30%).
LOWER CAPITAL GAINS TAX
Reducing the capital gains tax rate from 23.8% to 20% (eliminating the 3.8% tax used to fund the ACA) is meant to create greater incentives for people to invest. Of the 94 survey respondents, more than two-thirds agree that Congress should lower the capital gains tax rate. However, only about a third of all respondents said it would positively affect their company.
LOWER OR DISCONTINUE U.S. TAX ON FOREIGN INCOME
More than 40% favor lowering or discontinuing U.S. tax on foreign income of multinational corporations and 71% of all respondents said it wouldn’t affect their company. Those from larger firms (more than $100 million in revenues) are more than three times as likely to be very positively affected by lowering the U.S. tax on foreign income than smaller firms. Further, two-thirds agree with taxing foreign income in the year it’s earned rather than when the money is brought back to the United States as it is now. This change would decrease the incentive for U.S. firms to shift earnings overseas.
ENACT AN ENVIRONMENTAL TAX ON CARBON EMISSIONS
A tax on carbon emissions is supposed to encourage businesses to produce less carbon dioxide and other greenhouse gases. Forty-seven percent (47%) of all respondents favor an environmental tax on carbon emissions, and 79% said it would not affect their company.
OTHER CHANGES AFFECTING INDIVIDUALS’ TAX RULES
- Reduce the number of tax brackets: 68% favor reducing the number of brackets from seven to three (10%, 25%, and 35%). That would lower the top rate by about 5% and ease the tax burden on many Americans.
- Double the standard deduction: 69% favor doubling the standard deduction for individuals (currently $6,350) and married couples ($12,700). This change is intended to put more money in the pockets of those taxpayers who don’t itemize their deductions. It would also simplify tax preparation for many people.
- Eliminate most individual tax deductions: 42% favor eliminating all individual tax deductions except mortgage interest and charitable giving, even though more than half of all respondents said it would impact them negatively.
WHAT ABOUT THE NATIONAL DEBT?
The U.S. Congress will soon vote to increase the current debt ceiling again (the most recent was set in March at $19.8 trillion). When asked how important it is to stop increasing the national debt, more than half our respondents said “extremely important” and another 31% said “very important.”
The results of this pulse survey show why tax issues are complex and as difficult to resolve as ever. On one hand, senior finance professionals would like Congress to lower taxes for corporations and favor lowering the corporate tax rate, capital gains tax, and tax on foreign income. On the other hand, they want Congress to stop increasing the national debt and tend to favor a tax on carbon emissions and eliminate most individual tax deductions. While the impact of any of these changes on economic growth or the national debt is hard to predict, we can predict one thing: There will be plenty of controversy and drama in the discussions ahead.
Respondents’ organizations have annual revenue ranging from less than $1 million (10%) to more than $10 billion (17%), with an average about $3 billion and a median of $11-$100 million.