It’s not the government’s money, it’s the trucker’s money

As tax reform hits Washington, truckers weigh in on the importance of tax reform that is simple and rewards domestic investment.  ( Photo: Shutterstock )

On Sept. 13, Speaker of the House Paul Ryan, announced tax reform proposals would be released the week of Sep 25. The appetite for tax reform is at a higher level than at any other time since the Tax Reform Act of 1986.

Following the noticeable failure of healthcare reform, senior Republican leaders are keen to cement their piece of legacy into the Trump administration. President Reagan was able to pass tax reform, partly due to this popularity, however, Trump doesn’t have that luxury, and must act fairly quickly to prevent tax reform from extending into 2018 as progress could stagnate with the November midterm elections on the horizon.

Currently, U.S. companies have a tax rate of around 39%, the highest among developed countries. A lower tax rate could encourage companies to repatriate some of the profits they’ve kept abroad to avoid taxes. In theory, that could encourage investment and hiring.

The Joint Statement on Tax Reform calls for taxes to be “simpler, fairer, and lower” for American families, and provides “lower rates for all American businesses.” The statement goes on to say, “to create a system that encourages American companies to bring back jobs and profits trapped overseas.”

The tax overhaul set to be announced this week is expected to include three key aspects:

  • The pursuit of a corporate rate of 20%; Trump has suggested that he would prefer a 15% rate proposal.
  • The framework would also set a slightly higher rate of 25% for “pass-through” businesses.
  • The administration is also pushing for a top individual rate of 35% — the same number it proposed in a one-page outline of principles in April. But there is not yet agreement among negotiators over what the effective rate for the wealthiest households should be.

Ryan has said he would champion any corporate tax reform that would benefit every sector of the economy.

The difficulty of any tax reform, especially those proposing to dramatically decrease corporation and individual tax rate bands, is the question of how are you going to pay for it, and there is yet to be any clarity on how this is going to be achieved.

A recent PWC report had this to say: “It remains unclear how the House and Senate tax committees may seek to offset the cost of lower business tax rates. While the border adjustment tax had been estimated to raise roughly $1 trillion over 10 years to offset part of the cost of lowering tax rates, the statement affirms that there is a ‘viable approach’ to lowering rates, promoting economic growth, and protecting the US tax base”

There are likely to be winners and losers, however. Initial calls suggest that corporations and ordinary workers will benefit, which should be seen as good news for the trucking industry.

“If you’re paying the highest corporate tax rate of any other mode, and we’re roughly around 29%, and the president is advocating 15%, that’s a considerable amount of money,” American Trucking Associations President Chris Spear told Transport Topics on Sept. 19.

Trucking executives, as represented by ATA, plan on advocating their positions and championing for passage of an overhaul this year, Spear said.

“It’s not the government’s money; it’s our members’ money. It belongs to them. And that’s money they can use to invest in new equipment, safer technologies, driver-pay, driver-training. Whatever it is, but that’s their money. And it’s their decision, and it’s best spent by them to help grow companies, secure jobs, and make certain that trucking is strong for the future,” Spear said. “Tax reform is a mammoth catalyst to doing just that.”

However, in reality, trickle-down economics doesn’t always benefit individual employees, tax windfalls tend to more often than not benefit shareholders according to the global strategy note from the Pavilion Financial Corporation, a global investment services firm, as published on Business Insider.

“Tax breaks to encourage firms to repatriate their foreign cash holdings have tended to overwhelmingly benefit shareholders, largely through share buybacks,” the note said. “Conversely, these deals have had little impact on long-term investment or employment. Going forward, we question the efficacy of another tax break and think take-up could in fact be low.”

If successful the implications to the trucking industry could be positive. Corporations depending on their priorities could invest in job creation and skills programs, while individual tax breaks will result in increased wages. This is by no means a given, this bill could stumble at any stage of the progress, however, if policymakers can work together in reforming the tax code, while in parallel address the windfall, industry to set to benefit.

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