Senior finance professionals want to lower the corporate tax rate, capital gains taxes, and taxes on foreign income, while instituting a carbon emissions tax, according to a survey by the Institute of Management Accountants.
The IMA surveyed 94 senior finance professionals in May, asking how they feel about some of the proposed tax reforms being considered in Washington. Two-thirds of the poll respondents indicated they are in favor of cutting the corporate tax rate from 35 to 15 percent and lowering the capital gains tax rate from 23.8 to 20 percent by eliminating the Affordable Care Act’s 3.8 percent Net Investment Income Tax.
“One of the tax proposals from the Trump administration is to reduce the capital gains rate to 20 percent,” said IMA director of research Kip Krumwiede. “The difference would be to eliminate the 3.8 percent tax used to fund the ACA. The majority of the group would like to keep the Affordable Care Act or Obamacare, but they don’t connect that to how to pay for universal health care. I don’t think the majority of the populace makes the connection that you probably will have to pay for this one way or another, through one tax or another.”
More than half the respondents said reducing the national debt was extremely important, and 31 percent said it was very important, so over 80 percent said reducing the debt was either very or extremely important.
“Generally when we asked questions about whether they favored cutting taxes that would benefit companies, they would favor it,” said Krumwiede. “But later when we asked how important they thought it was to reduce the national debt, a great majority of them were in favor of reducing the national debt. That explains in a nutshell why it’s so tough to do tax reform. Most people would like to reduce the national debt and the deficit, but they don’t want to pay for it themselves.”
The senior finance professionals polled by the IMA favor reforms in how multinationals are taxed on their foreign earnings. More than 40 percent are in favor of lowering or discontinuing U.S. tax on foreign income of multinational corporations, and 71 percent of all respondents said it wouldn’t affect their company.
“The U.S. taxes foreign income of multinational corporations, but only when those earnings are brought back to the U.S., and the majority agree with taxing the foreign income in the year when it’s earned rather than when it’s brought back," said Krumwiede. "Right now there’s an incentive for the multinationals to keep the earnings outside the U.S. About two-thirds agreed with taxing foreign income in the year when it’s earned rather than what it currently is, where it’s taxed only when it’s brought back to the U.S. That one might have a good chance of passing because it seems to make sense to keep earnings in the U.S. or bring them back, even if they’re earned in foreign countries.”
However, unlike some of the tax reforms under discussion by the Trump administration and Republicans in Congress, 47 percent of the respondents favor an environmental tax on carbon emissions.
“About half favored a tax on emissions, which many countries do but we don’t,” said Krumwiede. “But about 79 percent said it wouldn’t affect their company anyway. With the administration’s lack of interest in dealing with global warming, I can’t see that being passed or enacted anytime soon.”
When asked about personal income taxes, more than two-thirds of the poll respondents favored reducing the number of individual tax brackets from seven to three, while 69 percent favored doubling the standard deduction for individuals and married couples. Forty-two percent of the respondents favor eliminating all individual tax deductions except for mortgage interest and charitable giving, although over half of all respondents said it would have a negative impact on them.
The consensus seems to leans toward tax simplification. “As a general concept probably just about everyone would like to simplify the tax code, but they’re worried about whether it will affect them,” said Krumwiede. “As long as it’s something that would be simpler but appears to reduce their individual tax burden, they’re all in favor of it.”
The prospects for tax reform appear uncertain. “Based on the results and the tough time Congress had with repealing and replacing the ACA, I have trouble thinking that they’re going to be successful in significant tax reform or simplification,” said Krumwiede.
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