The United States Treasury dropped a bombshell at the White House yesterday when Secretary of the Treasury Steven Mnuchin announced plans to slash taxation rates on all American businesses. The proposed maximum tax rate would fall to a paltry 15 percent — down from the current 39.6 percent rate currently used.
This is big business, particularly when coupled with Trump’s National Economic Council director, Gary Cohn, announcing at the same time plans to make significant changes to the current personal tax code as well. Millions of sole proprietors and self-employed in the United States are chomping at the bit to hear how their personal tax situation may be changing as the 2017 season creeps onward.
Who Benefits From the Proposed Taxation Rate Changes?
There’s a lot of noise out there claiming the proposed taxation rate changes are aimed at making the rich richer and the poor poorer. Such statements come off more as propaganda than reality. Businesses across the board, big and small, will enjoy a cap of just 15 percent.
And that’s the key thing to focus on — that ALL businesses will benefit from these savings. This is a huge leap forward, regardless if you think corporate America should be paying more to Uncle Sam or not.
Under the tentative proposal, which is expected to be unveiled late this coming summer, individual tax rates will also change for the better, though the higher paid professionals out there shouldn’t expect massive savings at tax time. Gary Cohn stated that the government would trim the number of tax brackets down from seven to just three: 10, 25, and 35 percent.
Why the Sudden Changes?
Some might think it foolhardy for a new administration to make such aggressive changes to their available cash flow when there’s so much uncertainty with regards to situations brewing overseas. After all, the states have a military force that puts all others to shame — in fact bigger than the top 10 list of global military forces combined.
It takes a lot of Benjamins to finance such an army. Foreign relations don’t seem to be phasing the current administration though. They’re committed to making the mom and pop shops of America more profitable than most have ever been, provided the country doesn’t implode from the lack of available tax funds.
Other Benefits to Small Businesses
Though nothing is official until the ink has dried, the government also plans to eliminate the estate tax; a common stumbling block for small and medium size business owners when trying to iron out a succession plan to transfer the ownership of their business after they retire. Not to mention, easing the mind of business owners and their families with regard to what happens when that owner suddenly dies or becomes tragically ill.
The benefits of the new tax changes, should in theory help business owners keep more quality people on staff too, and potentially attract better employees to their business that would have otherwise looked for work elsewhere. With more money in the bank, some of those savings could and should be passed on to workers. Workers who’ve suffered through low wages and lack of raises and other benefits as the economy has been recovering over the last decade.
The Big Question Looming on the Minds of American Business: When?
If all goes as planned, Mnuchin states that he hopes legislation will pass through the House sometime this summer, then land on the President’s desk sometime between late summer and the end of the year.
What do you think?
Will it happen, or is this just some kind of pipe dream that will never happen in a million years?
Main Image Credit: Whitehouse.gov