Key Buchanan Provision Included in Tax Reform Blueprint
WASHINGTON – A provision authored by U.S. Rep. Vern Buchanan, R-FL, was included in a tax reform blueprint released today by House Republican leaders.
The tax reform outline lays out broad principles to follow when Congress drafts actual legislation to reform the tax code.
Those principles include reducing tax rates on certain small businesses by altering the manner in which their income is taxed. This approach is closely related to Buchanan’s Main Street Fairness Act, which would remove income earned by so-called passthroughs from the individual tax code and treat this income like business income earned by corporations.
The Main Street Fairness Act would ensure that small businesses – which account for 94 percent of all businesses in America – never pay a higher tax rate than large corporations.
“It’s time that Washington stopped punishing small businesses and started helping them,” Buchanan said. “My bill will help small businesses by removing their income from the personal tax system, which has substantially higher rates that those faced by corporations. I’m pleased that the major tax reform outline released today adopts this approach.”
The Speaker of the House and the Chairman of the House Ways and Means Committee today released a blueprint for reforming the American tax code. It includes a section that would lower rates for many of the nation’s small businesses. The inclusion of this provision points to a strong future for Buchanan’s bill and the pro-small business principles that drove its introduction.
“This major tax reform proposal is an important first step towards finally achieving a pro-growth, job-creating tax code,” Buchanan said.
As the tax blueprint says, “the tax treatment of business income will build on concepts developed by Rep. Vern Buchanan of Florida in his Main Street Fairness Act (H.R. 5076).”
The businesses that would be helped by Buchanan’s plan account for more than 68 million jobs.
A broad coalition of prominent business and tax reform groups have expressed their support for Buchanan's measure, including the National Association of Manufacturers, Associated Builders and Contractors, the National Retail Federation, Americans for Tax Reform, the Florida Chamber of Commerce and Florida TaxWatch.
The Main Street Fairness Act will establish that businesses that file taxes as passthrough income, such as sole proprietorships, partnerships, LLCs and S corporations, will never pay a higher rate than a corporation. Under current law, corporations pay a maximum tax rate of 35 percent, while small business owners pay up to 39.6 percent under the individual income tax code on top of additional taxes on earnings and investments. These small businesses pay more than 50 percent of their income in taxes in some states; in Florida, they face an effective tax rate of 42.6 percent according to the Tax Foundation.