While the construction industry historically has paid the highest effective tax rate of any economic sector in the country, with the passage of the Tax Cuts and Jobs Act (H.R. 1), a clear majority of construction companies will benefit from the new 20 percent deduction for qualified business income for pass-throughs. Along with the largest corporate rate cut in U.S. history to 21 percent, the doubling of the estate tax exemption to $11 million, reductions to individual tax rates, and changes to various accounting methods, the bill will ease burdens on the construction industry, family owned businesses and hardworking Americans.
• The TCJA that lowers tax rates and simplifies the internal revenue code while maintaining parity for Main Street businesses and large corporations.
• Repeal of Affordable Care Act taxes on wages and investment income.
• Repeal of the alternative minimum tax for individuals.
• Making the individual and pass-through tax rates permanent.
• Full repeal of the estate tax, known as the “death tax.”
• Efforts to increase the current corporate tax rate or decrease the pass-through deduction.
• Any proposal that widens the statutory rate gap between pass-through entities and large corporations.
The TCJA provides a simpler, fairer tax code, and analysis has shown that the bill lowers taxes for nearly 80 percent of U.S. taxpayers.
The new tax code contains a 20 percent tax deduction for pass through businesses that will result in many small businesses paying a much lower effective tax rate, which allows them to grow their businesses, pay better wages and support their communities. Small businesses also can immediately write off the cost of new equipment, further encouraging growth.
By lowering the corporate tax rate from 35 to 21 percent, the new code puts the United States on par with other developed nations, making us more competitive, encouraging reinvestment in the U.S. economy and incentivizing jobs and capital to return from overseas.
Due to the bill’s consideration under reconciliation, a process that only requires a majority vote in the Senate and avoids the 60-vote threshold, some provisions were required to be made temporary, and many of the benefits for individuals and pass-through businesses will expire in 2025.
Further, while the bill eliminated the corporate AMT, it only softened the AMT for individuals by increasing the exemptions by nearly a third, while retaining the complexity of requiring tax payers to calculate their AMT liability.
As a result of initial tax reform savings, ABC members reported they were able to make capital investments, invest in workforce development opportunities, provide raises and bonuses for current staff and hire more employees, according to a June 2018 survey of the ABC board of directors
For the 116th Congress, ABC supports additional tax reform measures to increase tax rate fairness, protect family businesses, support retirement savings and expand 529 education plans, including:
• Fully repealing the estate tax by passing the Death Tax Repeal Act (S. 215
), introduced by Sen. Thune (R-South Dakota) and Rep. Jason Smith (R-Missouri). This common-sense legislation will help family-owned American businesses keep and create jobs, grow the economy and relieve families of an unreasonable financial burden.
• Making the TCJA’s tax deduction for qualified business income permanent by passing the Main Street Tax Certainty Act (H.R. 216), also introduced by Rep. Smith.
• Allowing increased retirement contributions, incentivizing employers to boost 401(k) participation and modernizing the tax code to support retirement savings for hardworking Americans.
• Expanding 529 education plans to include industry-recognized apprenticeship programs, which would help address the construction workforce shortage currently impacting the United States.