Republicans tout their massive tax cut – but is it a boost

first_imgRepublicans tout their massive tax cut – but is it a boost or a bust? Since you’re here… Share on Facebook Gene Marks Share via Email Read more Share on Messenger comment Shares5757 Share on Twitter A lower tax base should drive capital spending and increase wages, but am I sure about how the specifics of the bill will impact me?Photograph: Chip Somodevilla/Getty Images Support The Guardian Gene Marks Have you done the number-crunching that’s required to truly know how the legislation will affect you and your business? US small business Trump administration Share on Twittercenter_img Contact author @genemarks In a hearing last week, the House small business committee took testimony from small business owners around the country to find out how tax reform was affecting them. Given that the committee is Republican-controlled, it wasn’t hard to guess what was said.“As a direct result of tax reform we have upgraded and replaced 12 doors in the frozen foods section of our store during the past few months,” Wettlin Treppendahl, the owner of Treppendahl’s Super Foods in Woodville, Mississippi testified. “This may not sound like big project to some people but that investment cost over $65,000 and most importantly provided work for our local refrigeration company.” US small business Topics Share on Pinterest … we have a small favour to ask. The Guardian will engage with the most critical issues of our time – from the escalating climate catastrophe to widespread inequality to the influence of big tech on our lives. 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Every reader contribution, big or small, is so valuable. Support The Guardian from as little as $1 – and it only takes a minute. Thank you. Share via Email Others had similar stories as Treppendahl. “Until last year, many companies, including us, didn’t want to spend their money,” the CEO of a digital media technology provider in South Carolina said. “But now, because of this big tax cut, any entrepreneur can see the opportunity to invest in its company with the goal to make more money for the company and its employees.”Reports from around the country seem to confirm that are there lots of other small businesses who are benefiting from the 2017 tax bill. A bank in Wichita, Kansas announced that the legislation will enable it to give more bonuses to its employees. A manufacturer in Louisiana says that, due to lower taxes, it can raise wages and boost investment. The US Chamber of Commerce has published an interactive map showing scores of companies who have converted their savings from tax reform into employee bonuses, increased benefits and cuts in pricing to customers. A stock market analyst says that tax reform, along with other reductions in regulations, is shifting the stock market “into overdrive.”Wow! Seems like great stuff. But is it true? I’ve always supported broad-based tax reductions and – even though I’m as terrified as many economists are about the impact these cuts will have on our government’s deficits and national debt in the long term – I’m confident that a lower tax base will drive capital spending, increase wages, attract foreign investment and significantly boost our economy. It’s the way to go.But am I sure about how the specifics of the bill will impact me? Are you?It’s only just the middle of the calendar year and only a few short months since the legislation passed. Many of us have seen a slight boost in our paychecks from reduced withholdings and that’s a good thing. But have you done the number-crunching that’s required to truly know how the legislation will affect you and your business? I can’t speak for the business owners who so confidently and happily testified to the congressional committee. But if they’re like most of our more than 600 clients, I’m not so sure they have.For example, have you taken the time to sit down with your accountant and create a “pro-forma” analysis of your tax liabilities for all of 2018 using the new rates, deductions and credits? This is not so hard. You can base it on estimated income and expense numbers from your results so far. You’re not going to know the impact of tax reform until you do the math. But this exercise isn’t the only exercise you should do. To really get the full picture, you should ask your accountant to complete one other exercise: consider the effects of a filing status change.That’s because, depending on whether your business files as a “pass-through” or a C-corporation you may (or may not) see a significant savings if you were to change how you file. This is not something that happens quickly so you need to run these numbers now. So have you and your accountant done all of this work and tested out all the alternatives? If you’re like me, you probably haven’t. If not, how can we possibly know how much the tax reform bill will affect us? Maybe all of those happy business owners who testified to the small business committee and all the other excited business owners praising tax reform have done this. But I have my doubts. Unless I’m convinced otherwise, I’ll have to take their testimony in this politically-charged debate with a grain of salt. 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