Tackling tax reform

Congressional Republicans and President Trump campaigned to reform the U.S. tax code to foster economic growth and create jobs. The most recent successful effort to significantly reform the tax code happened more than 30 years ago under President Reagan. Now is a critical time to make a once-in-a-generation change to the tax code, but it won't be easy.

House Republicans unveiled their tax reform blueprint, "A Better Way," in summer 2016. President Trump discussed numerous tax reform proposals throughout his campaign but released broad principles earlier this year. The two proposals agree on several provisions but differ in some ways. NRCA looks forward to working with President Trump and Congress to institute tax reform that lowers rates for all businesses.

Tax rates are key

Lowering tax rates for individuals and corporations has long been a top priority for NRCA. Currently, pass-through businesses pay their taxes with individual tax code rates as high as 39.6 percent; the rate can reach into the high 40s when factoring in state, local and other taxes. Both the House Republican proposal and President Trump's proposal would create a special tax rate for pass-through businesses to pay their business taxes at a lower rate than individual rates. The House Republican proposal calls for a pass-through business rate of 25 percent with a top personal rate of 33 percent. President Trump's proposal calls for a business rate of 15 percent with a top personal rate of 35 percent.

With the current corporate tax rate of 35 percent, U.S. businesses face the highest statutory tax rate in the developed world. Democrats and Republicans agree the corporate rate should be reduced to make the U.S. more globally competitive. Both proposals would reduce the corporate rate—the House Republican proposal to 20 percent and the president's proposal to 15 percent. A key point to the president's proposal is treating all businesses equally regardless of how they are structured, a priority for NRCA. Although the rates differ between proposals, NRCA is pleased lowering tax rates is a major focus for lawmakers.

As business owners look for capital to grow their businesses, many rely on capital gains and dividends. Both proposals seek to reduce these tax rates. The House Republican proposal caps these rates at 12.5 percent. The president's proposal doesn't specify an exact figure, but the rates most likely would be below 20 percent. His proposal also repeals the 3.8 percent investment tax authorized by the Affordable Care Act.

NRCA is pleased the House Republicans' Blueprint for Tax Reform eliminates the cumbersome cost-recovery method and allows businesses to immediately write off investments the year they are purchased. This would apply to nonresidential properties, including commercial roof systems. Full expensing would greatly accelerate demand for commercial roofs and create thousands of jobs. However, budget constraints could make full expensing difficult to include in tax reform.

Seeking simplicity

Since 2001, Congress has made more than 5,900 changes to the tax code, averaging more than one change per day. Congress now wants the average taxpayer to be able to file his or her tax returns on a postcard. To do so, both proposals call for eliminating all itemized deductions and tax credits except mortgage interest and charitable giving. They also seek to provide relief to individuals with children. In return for losing many deductions, the proposals would double the standard deduction to $24,000 for couples and $12,600 for individuals.

Two taxes NRCA has long worked to repeal would finally be eliminated under both proposals. The alternative minimum tax, which forces businesses and individuals to file their taxes twice, would be repealed. The estate tax also would be eliminated. This would provide relief to family businesses and ensure a business could continue on to the next generation.

NRCA action

Details will matter as lawmakers work to pass tax reform, and NRCA plans to be involved. NRCA is on the steering committee for the Parity for Main Street Employers coalition, the voice of comprehensive tax reform on Capitol Hill. The coalition actively has been working with Congress to lay the groundwork to ensure NRCA members are part of the conversation as the tax reform debate kicks into high gear this year.

NRCA encourages you to talk with your elected officials to let them know how important tax reform is to growing your business. You also can share your story with NRCA. Hearing firsthand from constituents is a huge motivator for members of Congress. Be sure to keep up-to-date with NRCA's grassroots advocacy network at roofingadvocacy.nrca.net.

Andrew Felz is NRCA's manager of federal affairs.