President Trump is just a few miles from NPCA headquarters today to announce the tax priorities of the administration and a major revision of the tax code. The White House released a 1-page summary of its priorities and a 9-page white paper on its major initiatives. We were pleased that our top three tax issues are all addressed. Early signs are that the GOP tax plan will also include NPCA’s priorities.
Lowering individual tax rates and closing corporate loopholes are a major part of the White House Tax Reform Framework and will consume much of the discussion in Washington. The debate will also likely include important topics such as a repatriation tax holiday or a much lower rate on foreign profits to bring several trillions of dollars parked overseas back into the United States. While those issues are important for the country, let’s talk about what is important for the precast concrete industry. Here are three common-sense suggestions that should be built into the new tax code.
- Adjust the rate for manufacturers that pay at individual tax rates as pass-through entities. According to the National Association of Manufacturers, up to two-thirds of manufacturers are set up as pass-through companies (also known as S Corps). Tax rates for this category of business can top out at 39.6%. That is absurd and unfair. The more appropriate measure would be to set the tax at the same rate paid on corporate profits, which might be anywhere from 15% to 25% in a new tax bill.
- Repeal the estate tax. When passing ownership to the next generation, the tax rate for the estate’s value above $5.49 million is 40%. It puts an unfair burden on family-owned businesses when considering the total assets of today’s precast plant. It is compounded in the 18 states where heirs also pay estate taxes to the state. It’s unfair and penalizes the sacrifices that families have made over the decades to nurture and grow their successful businesses.
- Incentivize investments in equipment through what NAM calls a “robust capital cost-recovery system.” Capital cost includes the price of equipment, the financing cost and the tax treatment of the investment. We agree with NAM that faster capital expensing lowers the after-tax cost and increases the number of projects that a company can take on. It’s a simple adjustment that can lead to more business and more jobs.
Think about how your precast concrete business can benefit from changes to the tax code and make your case to your Congressional members when the tax debate begins. We’ll be making the case for the industry, but individual calls to Congressional offices are vitally important. This is a complicated issue, and it’s time for more common sense and less politics. If you have additional suggestions or comments, I’d love to hear them. We are at a critical time in determining how taxes will impact our future and now is the time to speak out.