In a hearing last Tuesday, U.S. Treasury Secretary Timothy Geithner made some suggestions on corporate tax reform that made many small business owners squirm. He suggested that the entire concept of the “pass through” business entity needed to be revisited[1]. “Congress has to revisit this basic question about whether it makes sense to allow certain businesses to choose whether they are treated as corporations for tax purposes or not,” said Geithner during his oral testimony. Currently, about three-quarters of all the small businesses in the country use a pass-through tax structure, which allows business income to flow through to the business entity’s owners rather than being taxed on a corporate level. The original intent was to avoid double taxation.
S corporations and limited liability corporations (LLCs) are the most common types of pass-through corporation. Tax experts are predicting that even if tax expenditures and tax loopholes are eliminated, overall rates on C corporations – which are taxed on a corporate level – will not be reduced significantly without either the implementation of higher individual tax rates or by forcing pass-throughs to become C corporations. These types of reforms are necessary, many believe, in order to keep business in the country. However, the options are bleak. Neil Weber, RSM McGladrey tax specialist, predicts that changing S corporation regulations will “wreak havoc in tax planning.”
Do you think that tax reform is necessary? If so, is this the right type of reform?
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[1] http://www.investmentnews.com/article/20110301/FREE/110309982/-1/INDaily01&dailycount=1&issuedate=20110301
of course tax reform is necessary! The government NEEDS to stop punishing the small business owner by trying to put them out of business by taxing the hell out of us! That is the only reform we need. Government stop spending money WE don’t have and stop punishing the successful for being successful.
Will this new restructuring be instituted for new corp. or all corp.and should we get several new ones before it is to late.
The problem with business tax in general in the USA is that politicians have made it cheeper to manufacture products outside the US than inside the US. If jobs are to return to Americans this must change.
There was a politician a few years back that proposed replacing all these taxes with a national sales tax; that is to say first stop taxing businesses altogether and second replacing that tax with a federal sales tax. By his proposed method foreign products would have been taxed at the same rate as domestic products. There were 2 problems with his proposal, first Americans do not trust politicians, they felt the new federal sales tax would be charged but the business taxes would not go away. The second problem was and is the public have no idea how much of what a product costs is really tax, several taxes are hidden in the price of the product. I remember when the price of gasoline was 28 cents a gallon. Several of my customers say they remember when it was 15 cents or 10 cents a gallon. How much of that price is now tax? 65 cents a gallon? $1.35 a gallon? More?
This administration is hell bent on ruining business in America. I have come to the conclusion that there is simply no way they can be so ingorant of the consequences of these actions. The unavoidable conclusion in that the ruining of capitalism and business in American is purposeful. Now just why do you think they would want to do that…?
Gov’t needs money to operate,but has not been responsible and efficient for
generations.
Recently , we are at an apex of misguided policies : waging 2 questionable wars
at the same time,funding corruption in those war efforts, enabling and funding corruption
by both investment banks and retail banks, sponsoring tax policies (not only income tax)
that serve to perpetuate the wealth of the wealthy, while not fostering the production of
value for our overall economy.
In spite of what the vacuus,talking heads are telling us daily, there are some who beleive
we are nearing a tipping point of major economic and political disaster.
Whether or not to tax all business entities as c-corps is important to those who presently
use “pass-through” entities,but wouldn’t be so if we did a proper “housecleaning” and
reorganizing.