The House Ways and Means Committee is currently working on a Tax Reform that is sure to hurt any American who owns a home or uses financing to support their Business.

So what’s happening?   Congress is currently adding provisions to the Budget Bill that will bi-pass any tax reform bill in order to get the provision passed with a simple majority in the House.   What they are doing:

Their plan is to ELIMINATE your Interest deductions on your home and on your Business Financing in order to provide a lower tax rate to Corporations.   Why?  Because the Budget bill requires that any Cut in Revenue be offset or Balanced with a reduction in tax credits or deductions. So the offset being entertained now is to eliminate interest deductions!!

This is a HORRIBLE IDEA.   If you are a small business, over the last few years Commercial Loans have been difficult to get so a lot of businesses are using credit cards or home mortgages to finance their startups.   This tax change means that Small Businesses will be paying HIGHER TAXES because they will lose that financing deduction and then the Small Business Owner will get a double whammy by losing the interest deduction on their home mortgage!

In addition to elimination of Interest, they are planning on the elimination of the 1031 exchange which allows a business owner to defer Capital Gains on investment income if/when those funds are reinvested into another like investment within 6 months.  Example, say you are a business owner who has outgrown your current location so you want to buy a new building for your commercial business.  Under a 1031 exchange, done properly, the Capital Gain or increase in value you realize on your old property can be rolled over into your new property and not recognized until you sell the new building.  Congress wants to eliminate this rollover so you’d now have to pay Capital Gains Tax on the Old Property before even considering the purchase of a new location.   Top that off with the fact that because you now have less capital to invest in the new building because you had a tax outlay, you need to finance more – but let’s not forget, that interest now you have to pay more of is NOT DEDUCTIBLE.

But this gets worse!  The ripple effect could have an even bigger impact.  Why? Because businesses looking to finance New Assets may decide not to because they don’t have cash flow to do it in order to avoid non-deductible interest cost.  This will hurt manufacturing because if your business isn’t buying for lack of financing, or simply the decision NOT to finance, they won’t need to build or manufacture new items.  If they don’t need to manufacture new goods, layoffs are a likely possibility, then we are back to possible foreclosures and more layoffs, more financial strife.    Will some businesses buy anyway?  I’m sure they will.  But what is more likely to happen is that businesses will turn to self-financing at zero interest rates just to keep their product in the market.   So why’s that bad then?  Because our system is a balanced system… if everyone turns to self-financing, then banks have no income… see, this is a very delicate teetering economy.  Everyone, Everything financial depends on the support of businesses around it that utilize it.   If manufacturing no longer needs banks for financing, then banks will turn to increases in interest rates on Mortgages and other personal lending.   Which, you guessed it, you can’t deduct!

Who’s benefiting from this? LARGE CORPORATIONS with a reduction in Corporate income tax.   The problem is, Corporations tax collections are only about 11% of the total Tax collection, whereas Individuals and Individuals with pass-thru income generate nearly 89% of the total tax Collections.  These provisions being considered will LOWER Corporate Tax but will ultimately Increase taxes for everyone else!
However, this isn’t a done deal!   Please sign the petition to let your representatives know that you want them to look at this from a small business stand point!

Here is the link to sign the petition to Stop this Legislation from happening!
http://www.savethe1031.org/fp-cufb#cta