While the broad strokes of the House Ways & Means Blueprint are promising, there are still potential pitfalls in the details, well beyond the DBCFT fight. I spoke with Richard Rubin from the Wall Street Journal about the treatment of pass-through business income:
Republicans want to lower the tax rate for these businesses in conjunction with corporate rate cuts. But they haven’t decided what should be taxed at 25%, as a firm’s business income, and what should be taxed at 33%, as the owner’s wages at the firm.
They have a few choices, said a House GOP aide. One is a pure numerical split, allocating, say, 70% of pass-through income to wages and 30% to business profits. That is simple but politically toxic.
“It’s not a real 25% rate. That’s more like a 31% rate, in which case you’ve got trouble,” said Liam Donovan, director of legislative and political affairs at Associated Builders and Contractors, a trade group. “Using a blunt instrument is a non-starter.”
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