Washington, D.C. – U.S. Rep. Ed Perlmutter (CO-07) issued the following statement after voting against S. 2155, the Economic Growt...READ MORE
Colorado business leaders detail benefits of federal tax reform
Colorado business leaders said they have more to like about the final version of the federal Tax Cuts and Jobs Act that the U.S. House of Representatives passed Wednesday than the original version of the bill introduced last month.
Most notably, “pass-through” businesses such as S Corps and LLCs will get a 20 percent tax deduction on their first $315,000 on joint income, a level lower than the 25 percent rate that was first proposed.
In addition, local companies will be able to deduct interest on their loans and continue with popular tax credits such as the research and development tax break. And the state’s breweries will pay less excise tax on the beer they make.
Colorado Democrats continued to pillory the bill that very likely will be signed by President Donald Trump as a giveaway to the rich and to corporations on the backs of lower- and middle-class Americans.
Some particularly warned that individual or small-business tax breaks achieved through the bill will be more than offset by the rising cost of insurance, as the bill eliminates the four-year-old individual-insurance mandate that has brought many young and healthy people into the insurance pool and kept down the cost for older and more expensive-to-insure residents.
But several business leaders said this bill, rather than just lining the pockets of the wealthy, has particular provisions that will work as incentives for companies not just to increase profits but to re-invest in equipment, raise worker salaries and expand. And they say that will be the true barometer in the coming years as to how successful the legislation has been.
“I think businesses of all sizes are big winners in this bill. I think it will lead to more growth, higher wages and more jobs,” said Jeff Wasden, president of the Colorado Business Roundtable. “The investments need to be made by corporate America. We need to hold ourselves accountable. The money does not need to go into CEOs’ paychecks, into shareholders or into stock buybacks.”
Seemingly in answer to criticisms of the bill, AT&T, which employs almost 4,000 people in Colorado, announced Wednesday that it will increase capital spending by $1 billion and provide $1,000 bonuses to 200,000 U.S. employees because of the bill.
More companies are likely to benefit from a provision that allows for the immediate deduction of capital investments, which Greg Berger, the Denver-based co-chairman of the tax department for law firm Brownstein Hyatt Farber Schreck LLP, said will move some companies that have been holding off on buying new equipment off the fence to do it.
Bob Pease, CEO of the Boulder-based Brewers Association, predicted mass investments as well by craft breweries — about 350 of which operate in Colorado — after the final version of the bill included tax cuts that will total about $142 million sector-wide.
Brewers making 60,000 or fewer barrels of beer per year — a category that includes 97 percent of American breweries — will see excise taxes cut next year from $7 to $3.50 per barrel. That rate will drop from $18 to $16 per barrel for each barrel between 60,001 and 2 million for breweries. And even the largest breweries, such as MillerCoors, will receive tax breaks on their first 6 million barrels that are likely to amount to about $12 million per company.
“This money will be used to upgrade labs or to put in bottling lines, and ultimately to make more beer,” Pease said. “When small breweries make more beer, they create jobs and hire more workers.”
Small companies that are registered as pass-through businesses — those S Corps, limited liability companies and others where business owners file tax returns that combine their companies’ income with their personal income — will have a 20 percent deduction on their first $315,000 in income and an effective 29.6 percent tax rate above that level, Wasden explained. Early versions of the bill had put the beginning pass-through rate at 25 percent or above, and a number of small-business leaders had said that would be no help to them, as they were paying at lower rates right now.
Also, while critics have said the tax bill did not eliminate enough deductions and loopholes to make the bill true reform, the National Association for the Self-Employed said that it eliminated enough “unnecessary and time-consuming itemized procedures” that it will free up additional time and money for employers to put toward their companies rather than spending on meeting tax rules.
“The Tax Cuts and Jobs Act slashes taxes for millions of small businesses so they can reinvest their money, grow and create jobs,” said Juanita Duggan, president and CEO of the National Federation of Independent Business.
Critics said that the final bill will do much more damaging things to the national deficit, to average Americans and to some budding industries.
U.S. Rep. Jared Polis, D-Boulder, tried and failed to reinstate a wind-production tax credit in the bill and to add an amendment to promote technology and innovation in electric vehicles. He also failed to get the bill to repeal a provision allowing oil and gas companies to expense intangible drilling costs, which allows such businesses to deduct most of the costs of drilling new wells.
“This is nowhere close to real tax reform that Colorado families and businesses have been seeking,” added U.S. Rep. Ed Perlmutter, D-Golden. “It doesn’t simplify the tax code or make it more conducive for economic growth. In many ways, it adds more loopholes and rigs the system even more against hard-working families.”
Adam Fox, director of strategic engagement for the Colorado Consumer Health Initiative, also pointed to reports predicting that insurance costs will rise without an individual mandate and that some 13 million Americans who are now insured will not buy insurance next year without the requirement. That will add to the deficit, hurt middle-class Americans and lead to cuts in Medicare and Medicaid, he said.
“With just one partisan vote, little public input and a rushed debate, Congress narrowly chose to destabilize the insurance market by ending the individual mandate and set the stage to end many aspects of health care as we know it,” Fox said.