What Might Future Tax Reforms Look Like?

CliftonLarsonAllen Principle and Farm CPA Today blogger Paul Neiffer says President-elect Trump and the Republican in both the House and Senate are meeting and mulling over what tax reform proposals will happen next year.

Neiffer: "It's very likely we will have tax reform. One of the key areas that they are pushing is to drop the top corporate income tax rate down to — the republicans in the House and Senate were talking about 20 percent and Trump was talking about 15 percent. Sounds like they are all in agreement right now at the 15 percent level. Now that is a dramatic decrease from our 35 percent. To pay for that, farmers may not be able to deduct interest expense and some other provisions that would offset that. But having a top tax rate of 15 percent is actually pretty good. One of the other proposals that is floating around out there is to make all flow through business income to be taxed at a top rate of 15 or 20 percent also. Now that is a little bit trickier, I'm not sure that is going to happen."

Neiffer says that Kansas placed into effect a similar rule to that flow business income tax proposal a few years ago where business income would be taxed at zero. Then employees who earned salary or wages, converted themselves to businesses to avoid paying Kansas state income tax. Congress is cognizant of these issues as they discuss that proposal.

He concludes that there will likely be future tax reform and if it happens, tax rates will be reduced.