PMSE Letter to Chairman Brady on House GOP Tax Blueprint
July 18, 2016
Dear Chairman Brady,
On behalf of Main Street employers nationwide, we would like to express our support for the goals outlined in the tax reform blueprint released on June 24, particularly those that would help the businesses represented by Parity for Main Street Employers (PMSE).
PMSE’s tax reform goals are embodied in our pass-through principles letter dated March 17 and signed by more than 100 national trade associations: Tax reform should be comprehensive; restore rate parity while establishing more reasonable top rates; and eliminate the double tax on corporate income. We welcome the opportunity to work with you and other stakeholders to refine your plan further, but we believe the blueprint makes progress on these principles by taking a comprehensive approach to reform; reducing tax rates on both pass through businesses and C corporations, and reducing the double tax on the corporate sector significantly.
The reduction of rates for pass through businesses is particularly important. In 2013, tax rates on S corporations, partnerships, and sole proprietorships increased sharply as a result of the fiscal cliff and the implementation of the Affordable Care Act (ACA) surtax. Specifically, the top rate paid by pass through businesses increased from 35 to nearly 45 percent. With the additional tax obligations at the state level, the top rate for pass through businesses can exceed 50 percent for some. By capping the rate paid by these businesses at 25 percent, the blueprint would reduce the top rates paid by these employers to more reasonable and competitive levels. The details of how this cap would be imposed will be important; and it is critical that the capped rate apply to all business income, just like the top rate applies to all C corporation income.
The reduction in the tax rate on capital gains is also of particular importance to the members of PMSE. These rates also increased sharply from 15 to 23 percent, as a result of the fiscal cliff and the ACA surtax. One effect of this massive tax hike was to increase the double tax imposed on C corporations, moving the tax code in exactly the wrong direction. PMSE was pleased to see that that the blueprint would return the tax on capital gains to more reasonable levels.
As you have acknowledged, the blueprint is an outline with numerous gaps that need to be filled in. For example, while the Blueprint includes a significant rate reduction for pass through businesses, it falls short of restoring actual rate parity. We would like to work with you and your staff to achieve that goal while making certain that the final legislation moving through Congress is something Main Street employers can support.