While the construction industry historically has paid the highest effective tax rate of any economic sector in the country, with the passage of the Tax Cuts and Jobs Act (H.R. 1), a clear majority of construction companies will benefit from the new 20 percent deduction for qualified pass-through income. Along with the largest corporate rate cut in U.S. history to 21 percent, the doubling of the estate tax exemption to $11 million, reductions to individual tax rates, and changes to various accounting methods, the bill will ease burdens on the construction industry, family owned businesses and hardworking Americans.
• The Tax Cuts and Jobs Act that lowers tax rates and simplifies the internal revenue code while maintaining parity for Main Street businesses and large corporations.
• Repeal of Affordable Care Act taxes on wages and investment income.
• Repeal of the alternative minimum tax (AMT) for individuals.
• Making the individual and pass-through tax rates permanent.
• Full repeal of the estate tax (“death tax”).
• 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.
The Tax Cuts and Jobs Act provides a simpler, fairer tax code, and analysis has shown that the bill lowers taxes for nearly 80 percent of U.S. taxpayers.
The new tax code contains a 20 percent tax deduction for pass through businesses that will result in many small businesses paying a much lower effective tax rate, which allows 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 percent, 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.
Due to the bill’s consideration under reconciliation, a process that only requires a majority vote in the Senate and avoids the 60-vote threshold, some provisions were required to be made temporary, and many of the benefits for individuals and pass-through businesses will expire in 2025.
Further, while the bill eliminated the corporate AMT, it only softened the AMT for individuals by increasing the exemptions by nearly a third, while retaining the complexity of requiring tax payers to calculate their AMT liability.
Due to the passage of the Tax Cuts and Jobs, 55 percent of ABC’s contractor members plan to hire more employees, and 52 percent plan to invest in workforce development, according to a recent poll. In addition, 90 percent of member companies say employees have seen an increase in their paychecks.
ABC continues to advocate for the individual and pass-through deductions to be made permanent, a fix to the AMT for individuals and a full repeal of the estate tax.