Rules Today Mean an Understanding of Political Nomenclature
In the modern business-world, anticipating the future requires an understanding of political nomenclature and chaos.
The world recently changed for many business owners in the United States. If you’ve historically conducted a successful business in the U.S., you better keep your eyes and ears open on the latest legislative developments.
Good governance and in particular tax legislation has always been about ways to increase revenues at all times without killing the “golden goose”. Nobody wants to pay and everybody wants more things; so the pendulum swings from corporate to the individual to global. The challenge we have today is that Congress and the executive branch have historically made or proposed legislative changes toward the end of the year when nobody has time to redirect their efforts and focus on a meaningful outcome.
As a result, a “quasi” territorial tax system has evolved. Is this our “Leading Indicator” that a full territorial tax system is in our near futures? Meaning that you will only pay taxes on income made within your own effective “government” (United States/Residency). Will we soon base all taxes on residency, not citizenship (worldwide income)?
The current Change rewards Corporations before People. Not People before Corporations as it WAS.
Late December, the President signed legislation changing the landscape of business and individual taxation. Corporate tax rates have been reduced by 40% and initiated a corporate quasi-territorial tax system. Individual (people) tax brackets have likewise been reduced, albeit only slightly. Individual tax deductions have been significantly curtailed while increasing allowable standard allowances. Self-employed and associated pass-through businesses in most categories will also see reduced rates.
The most notable challenges of the new legislation created is in the international arena. The new provision created a global tax on intangibles (called GILTI) and imposes an effective 10.5% corporate level tax with the remainder excluded from income under the aforementioned quasi-territorial regime. Global structures owned and operated by individuals, families, estates, trusts, joint ventures, and pass-throughs pay a GILTI at upwards of 37% and do not receive the corporate level territorial exclusion.
This corporate versus individual disparity is creating terrific drama and challenges as advisors and taxpayers regroup their thinking as to how best to navigate global business operations while avoiding excessive taxation.
Morris + D’Angelo reacted swiftly to protect our customers and their options. We pride ourselves on providing best of class advisory and alternatives. This is an ongoing process as the legislation is radically different in approach than the philosophy that served for nearly seventy years our country so well. As a modern and nimble advisory firm, the primary concept we champion is to “hold on and prepare for more changes”.
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If you would like Daniel to speak to you or your Professional Group and bring clarity about the new frontier of the new business tax law changes. Please contact us.
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