This week the President of the United States will work on the first overhaul of the tax code in three decades. The last time the U.S. had comprehensive tax reform was 1986.
After Trumpcare failed, President Donald Trump will focus on tax reform with a special emphasis on the corporate tax rate. Congressional Republicans are preparing to adopt a budget resolution in May or June that includes reconciliation instructions to the tax-writing committees to accomplish corporate tax reform.
The insurance industry is paying close attention to tax reform efforts. It is likely that 2017 will bring significant changes to how U.S. domiciled insurance companies will be taxed. Proposals to cut corporate tax rates could change how insurance companies invest; modifications could also make the U.S. more enticing as a headquarters for global insurance or reinsurance enterprises; and alterations could increase the value of reinsurance that mitigates underwriting losses.
How will Republicans reach their goal of cutting corporate tax rates without piling on debt? Sign up today for the 29th Annual Insurance Tax Seminar to be held in Washington, D.C., June 1-2. Learn from experts about the latest developments in corporate tax reform and other legislative activity affecting the insurance sector.
Republicans want to slash rates for corporations. The current tax regime with its 35 percent corporate tax rate encourages companies to move operations, assets, and corporate citizenship overseas. As it stands, the high U.S. corporate tax rate incentivizes companies to produce their products and earn their profits abroad using a variety of tax-avoidance strategies to amplify domestic costs and minimize domestic profits.
Both President Trump and congressional leadership as a priority have identified tax reform. Some suggest that the corporate tax rate should be no higher than 15 percent in order to be internationally competitive and promote more investment in the U.S. Corporate America believes that a tax reform plan will jump-start additional investments, leading to higher growth in the economy. For example, Randall Stephenson, the Chief Executive Officer of AT&T, told analysts, “We know at AT&T that if you saw tax rates move to 20 percent to 25 percent, we … would step up our investment levels.”
Republican’s failure to reach consensus on repealing Obamacare, some political pundits argue, could hurt Trump’s sweeping corporate tax reform. Yet the demise of the healthcare bill may not jeopardize the entire Republican agenda, including Trump’s pledge to cut the corporate tax rate to 20 percent or less. During one debate with Hillary Clinton in 2016, Trump told voters: “Under my plan, I’ll be reducing taxes tremendously, from 35 percent to 15 percent for companies, small and big businesses. That’s going to be a job creator like we haven’t seen since Ronald Reagan.”
But Trump’s campaign plan to cut the corporate tax rate would add $1.4 trillion to the deficit over a decade, according to the conservative Tax Foundation. As this issue continues to be a moving target, don’t miss the Federal Bar Association’s 2017 Insurance Tax Seminar. Register on or before April 21, 2017 at www.fedbar.org/instax17 to take advantage of early bird rates. Gain a unique understanding of what corporate tax reform could mean for the insurance industry!
Stacy Slotnick, Esq. holds a J.D., cum laude, from Touro Law Center and a B.A., summa cum laude, from the University of Massachusetts Amherst. She performs a broad range of duties as an entertainment lawyer, including drafting and negotiating contracts; addressing and litigating trademark, copyright, patent, and other IP issues; and directing the strategy and implementation of public relations, blogging, and social media campaigns.