On behalf of Maine’s business community, I would like to sincerely thank Sen. Susan Collins for her role in strengthening the Tax Cuts and Jobs Act, and urge her to continue her stewardship of the tax package agreed to by the Senate-House conference committee. The conference committee reached agreement on a final tax reform bill at midday Wednesday. This historic bill is a step in the right direction to bring about needed tax changes that are absolutely critical to Maine’s families, Maine’s economy and Maine businesses.
The House and Senate recently passed their own versions of the tax reform package. Because the House and Senate bills were different, Congress appointed a conference committee earlier this week to examine both versions of the tax bill and come up with a compromise. On Wednesday, agreement was reached. We understand there are many provisions that made it into the final compromise.
TERRITORIAL TAX SYSTEM
Originally, both House and Senate bills doubled the child care credit to $2,000 and the standard deduction to $24,000 per family. Both bills also lowered the corporate tax rate from 35 percent to 20 percent, and converted the present system the United States uses to tax companies that operate overseas from a worldwide to a territorial system. We understand the corporate tax rate is being lowered to 21 percent and companies will be taxed based on a territorial system. (The United States is the only G-7 country that does not operate under a territorial tax system. By converting to a territorial tax system, U.S. companies will now compete on a level playing field with foreign competitors.)
The agreement would also allow small businesses that operate as partnerships, sole proprietors and others whose business income flows through to the individual income tax to deduct 20 percent of their income before paying taxes.
Originally, both bills differed on the number of individual income tax brackets, income tax rates, whether to keep or repeal the alternative minimum tax, the expiration of key tax breaks and the expensing of business capital purchases. From what has been reported, the final bill would repeal the alternative minimum tax; expand a deduction for state and local taxes to allow individuals to deduct income taxes and up to $10,000 in property taxes, and cut the top rate for individuals from 39.6 percent to 37 percent.
Tax reform is long overdue at the federal level. It has been 30 years since the tax code was last updated. Obviously, on a global scale, a lot has happened since that time. For years, companies left the United States and relocated to other countries because of our high taxes. The United States has the highest corporate tax rate in the developed world at 35 percent. This impacts the ability of companies in the U.S. to compete globally and has no doubt cost the United States in terms of investment and jobs.
BOOST TO MAINE ECONOMY
Here in Maine, tax reform will boost our economy and help Maine’s businesses grow. Tax reform will result in increased investment and added jobs, as well as providing Maine consumers with more disposable income to put back into our economy. The Tax Foundation has estimated that, if passed, these tax changes will result in an additional 3,800 jobs for Maine and add approximately $1,933 in after-tax income for Maine’s middle-class families. That’s a significant number, and Maine businesses support putting more money in the pockets of Maine people.
Remember, the package may not be 100 percent perfect. It does, however, move us in the right direction, and it does remind us of Sen. Collins’ national leadership. In fact, the compromise package that has come out of the conference committee is stronger and more comprehensive as a result of her work.
We strongly encourage Sen. Collins to continue her stewardship of tax reform. Failure to pass tax reform will continue to hold companies in the United States on an unlevel playing field and impact their ability to compete globally, which will cost jobs. Maine can’t afford that.
Early next week, Congress will be voting on this issue. Ultimately, we are confident that Sen. Collins will do what’s right for the people of Maine.
Dana Connors is president of the Maine State Chamber of Commerce in Augusta.
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