President Donald Trump announced the details of his proposed tax reform plan Wednesday afternoon, nearing the culmination of his first 100 days in office. While many small business owners and advocates are applauding the highly-anticipated reform, critics from both sides of the aisle are chiming in.
The plan, which proposes a hefty tax cut for corporations including small businesses classified as pass-through entities, tackles the tax code inequality for small businesses by slashing the current 35 percent rate to 15 percent.
“We’re pleased to see the 15 percent business rate,” said Brad Close, senior vice president of public policy and advocacy for the National Federation of Independent Business. “We think it’s a great way to kick-start the small business economy.”
Many have called out the obvious tax break for Trump’s own real estate company, the Trump Organization, which is a pass-through entity, and say such cuts will primarily benefit wealthy individuals. Some experts say that slashing the tax rate on partnerships and limited liability companies could spark a rush of high-earning individual taxpayers reclassifying themselves as pass-through entities to take advantage of the lower rates.
Others point out the lack of explanation for how the plan will be funded and say Trump rushed the plan to show progress before the 100-day mark of his presidency. Tax cuts for pass-through businesses could enlarge the deficit by hundreds of billions of dollars, according to economists, and many predict the proposed 15 percent rate will likely be negotiated up to a higher rate.
“We’re scratching our heads trying to figure out the many missing details of the tax plan. We’re not sure that there are any—the plan just doesn’t seem ready for prime time,” said Roberton Williams, fellow at the Urban-Brookings Tax Policy Center.