Heres One Major Hurdle Facing Trumps Tax Plan
The Republican plan to push major corporate tax cuts through Congress as part of a budget reconciliation plan could run into some problems unless it also includes some pretty major changes to corporate tax credits and conditions on the repatriation of income held overseas.
Budget reconciliation measures allow a bare majority in the Senate to pass a bill without having to assemble a large enough coalition to vote down a filibuster. However, one price of using reconciliation is that legislation passed under its rules cannot add to the federal deficit in years outside the 10-year “budget window.”
That’s a huge impediment to the plan currently under consideration because if the White House-proposed corporate tax rate is reduced from 35 percent to 15 percent, it would almost certainly blow up the federal deficit. And its impact could be felt well beyond the 10-year budget window, even if the tax cut is scheduled to “sunset” after a fixed period of time.
That’s the case for at least two reasons.
First, businesses have considerable flexibility when it comes to timing their use of various tax credits available to them. For example, a company with a net operating loss in a given year can use that loss to offset taxable profits in other tax years, going back as far as five years or forward as far as 20.
For example, if a company is carrying a loss forward on its books, it might prefer not to claim it in a year when its tax rate was only 15 percent, especially if it knows that the corporate tax rate is scheduled to rocket back up to 35 percent in the future. Instead, it could hold on to the credit, using it to lower its tax bill sometime in the future, well outside the 10-year budget window.
http://www.thefiscaltimes.com/2017/04/26/Here-s-One-Major-Hurdle-Facing-Trump-s-Tax-Plan
