Tuesday, June 5, 2018
Both large and small businesses in the United States expect the measures included in the recently enacted tax reform legislation, the Tax Cuts and Jobs Act of 2017, to have a positive effect on their operations, according to Senate Finance Committee Chairman Orrin Hatch (R-UT).
In a recent statement, Hatch pointed to the findings of surveys by two major business associations, and another by polling firm Gallup. He said a "modernized tax code – complete with middle-class tax relief, a competitive corporate tax rate and other much-needed reforms – is energizing the economy."
A survey by the National Federation of Independent Business (NFIB) recently found that 75 percent of respondents believed that the tax reform law would positively impact their business, with 87 percent responding that these measures will have a positive effect on the US economy in general.
The same survey also revealed that 44 percent plan to use tax savings to increase employee compensation, and 27 percent plan to use tax savings to increase the number of staff they employ.
Manufacturers are similarly optimistic, according to a survey by the National Association of Manufacturers (NAM), which found that 77 percent of NAM members are planning to hire more staff because of tax reform, while 86 percent reported that they are planning on increasing investment.
A recent Gallup poll also suggests that tax reform is contributing to a feel-good factor about the US economy among taxpayers at large, with 67 percent optimistic about the availability of good jobs, a 17-year high.
However, praise for the TCJA is far from universal. Some witnesses were highly critical of the legislation at a recent Finance Committee hearing on the effectiveness of the new law, especially with regards to the new 20 percent deduction for certain pass-through business income, which they argued is overly complex and is fueling tax avoidance, contrary to the objectives of tax reform.
In his testimony before the committee, David Kamin, Professor of Law at the New York University School of Law, remarked that the law has turned out to be a "bonanza for tax planning" by targeting certain types of income and "drawing complex, arbitrary, and unfair lines" around the pass-through deduction.
"The new reform fundamentally undermines the integrity of the income tax by expanding preferential taxation of income earned in certain ways but not others," he said.