Tax Reform

OVERVIEW

The passage into law of the Tax Cuts and Jobs Act in 2017 provided economic growth and allowed a clear majority of construction companies to benefit from the new 20% deduction for qualified business income for pass-throughs. Along with the largest corporate rate cut in U.S. history to 21%, the doubling of the estate tax exemption to $11 million, reductions to individual tax rates and changes to various accounting methods, the new tax code has eased burdens on the construction industry, small and family-owned businesses and hardworking Americans.

President Biden, through the American Jobs Plan and the American Families Plan, is proposing significant tax increases that would impact ABC members and their businesses. While President Biden claims these increases would only impact the wealthiest Americans and corporations that can afford it, the reality is that the proposals would ensure that investment in new small businesses plummets, family-owned businesses suffer, and small business owners have less money to put back into growing their businesses and paying their employees.

Maintaining pro-growth tax policies will be essential to ensuring the economy is able to fully recover from the COVID-19 pandemic.

ABC SUPPORTS

  • The continuation of TCJA policies that lower tax rates and simplify the internal revenue code while maintaining parity for Main Street businesses and large corporations.
  • Repeal of the alternative minimum tax for individuals.
  • Making the top individual rate permanent.
  • Making the 20% pass-through tax rate permanent through passage of the Main Street Certainty Act (S. 218/H.R. 1381).
  • Full repeal of the estate tax, known as the “death tax” (S. 617/H.R. 1712). 

ABC OPPOSES

  • Efforts to increase the current corporate tax rate or decrease the pass-through deduction.
  • Any proposal that widens the statutory rate gap between pass-through entities and large corporations.
  • Proposals to increase the capital gains tax rate.
  • Proposals to increase the top individual rate.

BACKGROUND

The TCJA provides a simpler, fairer tax code, and analysis has shown that the bill lowers taxes for nearly 80% of U.S. taxpayers. 

The new tax code contains a 20% tax deduction for pass through businesses that has resulted in many small businesses paying a much lower effective tax rate, allowing them to grow their businesses, pay better wages and support their communities. Small businesses also can immediately write off the cost of new equipment, further encouraging growth. 

By lowering the corporate tax rate from 35% to 21%, the new code puts the United States on par with other developed nations, making us more competitive, encouraging reinvestment in the U.S. economy and incentivizing jobs and capital to return from overseas. 

Proposals from President Biden and Democrats in Congress seek to repeal some of the critical policies of the TCJA and enact anti-growth, penalizing tax policies, including raising the corporate tax rate and increasing the capital gains tax after death.

Increasing the corporate tax rate would make America less competitive globally and slow the economic growth needed to fully recover from the COVID pandemic. The Biden tax plan also jeopardizes individually and family-owned businesses by raising taxes on what they earn, when they are sold and when they are passed from one generation to the next. The combined tax penalty of taxing unrealized capital gains by 43.4% at death combined with the 40% estate tax would force many family-owned construction businesses to sell the business just to pay these taxes, making it nearly impossible to keep these businesses in the family.