We are fast approaching what many believe is crunch time for tax reform. There is a renewed push by the White House and Congress to enact tax reform by year’s end. President Trump is urging Congress to “move fast,” while the House and Senate work to identify a process to make it possible.
As the debate intensifies, policy goals will be fleshed out, trial balloons will be floated in the media, and key lawmakers will get down to business in assembling a package of reforms to the tax code that can pass muster in both chambers.
A mainstay of the tax reform discussions is a call for cuts in the corporate tax rate. Since the vast majority of U.S. businesses operate as pass-through businesses, tax reform plans have also applied the benefits of lower tax rates to certain pass-throughs. These pass-throughs, including S corporations and partnerships, don’t pay taxes themselves, but pass their earnings through to their owners who pay taxes at their individual rates.
Some in Washington have suggested that professional services pass-throughs – such as accounting firms – should not be treated like other businesses because of the mistaken belief they don’t help drive the economy. We know that’s not the case.