On Wednesday, President Trump announced his highly anticipated tax reform plan at a closed-door event at the Loren Cook Company in Springfield, Missouri. Praising the legendary Route 66 as America's first Main Street--one of the original highways in America--Trump declared that the U.S. would begin a comeback of historic proportions with Main Street-like companies.
In less than 30 minutes he laid out a very broad plan--heavy on catchphrases and light on minutiae. Both what he said and what he didn't say are important--those details can provide a road map for small business on what to expect.
Let's take a look at both what Trump said and what he didn't say about the four main pieces of his tax reform proposal--and how that might affect entrepreneurs nationwide:
1. Simplification of the tax code
Cumbersome tax codes are a major concern of most entrepreneurs. The tax code's current state does not benefit those that do not have an army of accountants.
Ninety percent of Americans need help to do their taxes. Trump's new plan would theoretically remove loopholes and complexities that often benefit the rich and special interest. Exactly which deductions and loopholes are still up in the air.
At the same time, in 2016, Intuit--which owns TurboTax--made over $4 billion in revenue, according to its 2015 Annual Report. Are we going to take steal from Paul to pay Peter?
2. Reduction of business taxes
Depending on how your business is set-up (S Corp, C Corp or L.L.C.) Trump's proposed business tax cut may or may not impact you. Tax rates on corporate taxable income can reach as high as 35 percent (or more when including state and local taxes).
For businesses competing globally, the tax rate has a double affect on your competitive edge. Reducing the tax rate to 15 percent would create a competitive environment for labor and your bottom line.
Paul Reilly, CEO of Raymond James, sees a 15 percent tax as still too low to pay for the operation government, according to a CNBC interview. Sure, we want taxes lower. But is 15 percent realistic?
3. Tax relief for middle-class families
Trump proposed lower taxes for the middle class, declaring that middle-class Americans should be able to take more of their paychecks home and have more to spend. While trying to make good on a campaign promise to the middle class, exactly who Trump considers middle-class and what that tax break looks like is anyone's guess.
Nevertheless, if purchasing powering does increase, more of your goods and services will be bought. That would be a win-win for everyone.
4. Return overseas wealth to the U.S.
We'd all love to be in a position where our business is so profitable we bank with offshore accounts. If Trump has his way, this may be a thing of the past.
The tax reform plan could make it less punitive and bureaucratic for companies to bring back corporate offshore profits. Trump says he estimates as much as $5 trillion dollars are overseas in fear of being taxed--and that bringing back these dollars could spur billions in struggling communities and put money in your pockets.
This sounds good, but the how has eluded legislators for years. President George W. Bush implemented his idea of repatriation--called the temporary holiday tax--and that was short-lived.
Overall, Trump's highlighted plan sounds great for entrepreneurs--almost too great, with very little detail about its feasibility. At the least, it's certainly something to keep a close eye on. In the meantime, it'll probably be a while before Congress votes on passing any potential tax reform legislation--so until then, it's business as usual.