Tax Reform

Overview

The construction industry historically has paid the highest effective tax rate of any economic sector in the country. Now, with the addition of a new top individual bracket, small construction businesses organized as pass-through entities face significantly higher statutory rates than America’s largest publicly traded corporations. Given that 30 years have passed since the last fundamental restructuring, it is time for Congress to pass comprehensive reform that will simplify the tax code while providing for fair and equitable treatment irrespective of business size, structure or sector.


ABC Supports

• The American Job Builders Tax Reform Act, which would spare small construction contractors from the onerous compliance trap of look-back and percentage-of-completion accounting and allow them to use the method of their choice.
• Comprehensive reform that lowers tax rates and simplifies the internal revenue code while maintaining parity for Main Street businesses and large corporations.
• Fair effective rates across industry, size and structure.
• Repeal of the estate tax (“death tax”).
• Repeal of the individual and corporate alternative minimum tax (AMT).
• Reform of depreciation schedules to reflect the useful life of capital investments.
• Repeal of Affordable Care Act taxes on wages and investment income.

ABC Opposes

• Corporate-only tax reform.
• Any proposal that widens the statutory rate gap between pass-through entities and large corporations.


BACKGROUND

While the U.S. corporate tax rate stands among the highest in the industrialized world, more than ninety percent of construction businesses are subject to the individual rate, which remains higher still. Not only would corporate-only reform fail to provide relief for tens of millions of small businesses, it would in fact amount to a significant effective tax hike, as broadly shared credits and deductions are eliminated to finance a corporate rate cut. Instead of widening the existing gap between Main Street and the Fortune 500, Congress must enact comprehensive reform that keeps rates low and equitable for businesses of all types.

Another key part of the merit shop vision for comprehensive reform is the American Job Builders Tax Reform Act, which would rectify an unintended consequence of the 1986 Tax Reform Act that forces a growing number of small contractors into the onerous compliance trap of look-back and percentage-of-completion accounting.  The American Job Builders Tax Reform Act would bring the small contractor threshold in line with 21st century size standards and allow the overwhelming majority of construction firms to use the accounting method of their choice.

As the economy continues to recover, the country can ill afford a structural handicap on small business, the primary engine of job creation. Comprehensive tax reform will establish an encouraging climate for capital investment and economic growth. ABC supports minimizing the overall tax burden while reducing complexity and providing needed certainty to the construction industry and the broader business community.

UPDATE

On Nov. 2, 2017, Republicans in the U.S. House of Representatives unveiled the Tax Cuts and Jobs Act of 2017, a comprehensive tax reform bill that has the support of Congressional leadership and President Trump. U.S. Senate Republicans also revealed their proposal for tax reform on Nov. 9.

The House and Senate passed their versions of tax reform on Nov. 16, 2017, and Dec. 2, 2017, respectively. Both chambers will meet in Conference to resolve differences between the two versions before sending a final bill to President Trump.