What the new tax law means to you - Part 2 - Business taxes:
Bottom Line: The biggest package of tax changes since the Reagan reform are now law. Unlike the personal tax rates which expire after 2025 - the business tax rates are now permanent. In the first part of today's series I broke out the personal tax rates. Here's what it looks like for businesses.
Cuts the corporate tax rate to a flat 21% with limited deductions
Applies the individual tax rates to pass-through businesses (S corps, Limited partnerships, etc.) with a standard 20% deduction rate
Repatriation taxes - one-time tax of 15.5% on cash & 8% on assets
Now here's the thing. As much as you may have heard noise about how this new law is a big giveaway to corporations over people but here are a couple of important facts. The most recent tax data for corporations (from 2016) shows the following:
Average gross corporate tax rate 26%
Average net corporate tax rate 18%
This tax law will actually act as a tax increase on a number of companies that used to game the old tax code (to make big money but avoid paying any taxes because of the favored businesses that ran and fancy accounting). This law is advantageous to companies that couldn't take advantage of the tax loopholes and paid the highest tax rate in the developed world, while it evens the playing field with those that did. Who can really argue that point? With the pass-through rate also being taxed as ordinary income, it also eliminates that tax loop hole for individuals who'd set themselves up as an entity to game the system as well. In other words, fairness, over picking winners and losers with the tax code - is what this reform represents.
As we've already seen numerous corporations who will benefit have already announced plans to raise salaries and increase employee bonuses. Those companies include:
AT&T
Boeing
Fifth Third Bank
Sinclair Broadcasting
Washington Federal
Wells Fargo