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Tax Reform Expert Agrees with Real Estate Roundtable's View of the House and Senate Tax Bills
In a recent article with members of the Real Estate Roundtable, CEO Jeffrey DeBoer, and Senior Vice President, Ryan McCormick, the two discussed the types of relief that Congress is considering for pass-through businesses. These effects would affect business owners and real estate investors, like Mr. Gonzalez. Commercial real estate is primarily constructed, owned, and managed by businesses and entrepreneurs operating in pass-through form.
"Today, most economic activity in the United States is conducted by pass-through businesses—partnerships, LLCs, S corporations, REITs, and sole proprietorships. In 2013, the most recent year we have data, pass-throughs generated nearly 62 percent of total business income. Well over 90 percent of small businesses (500 or fewer employees) are organized in pass-through form, and remarkably, these businesses created more than 60 percent of the net new jobs over the last 25 years," said Mr. DeBoer. Mr. Gonzalez stands by the fact that "if something is not broken, why fix it?"
Mr. McCormick says that "The House bill would create a new, reduced rate for pass-through business income of 25%. In addition, a lower rate of 9% rate for small businesses would be phased in gradually over five years. Eligibility for the 9% rate would phase out for taxpayers filing a joint return with incomes over $150,000 ($75,000 for singles)."
This basically means that the House bill creates a strong guard against abuse of the pass-through rate, while creating a powerful new incentive that would attract capital and investment to entrepreneurial activities. Therefore, the Roundtable is in favor of the House pass-through proposal because it recognizes that not all owners of pass-through businesses are the same—"some owners run the business, whereas others are just investors". Mr. Gonzalez applauds the fact that "the House approach promotes capital formation and job growth while avoiding potential abuse by looking to the active owner's investment in the business. It will be a powerful catalyst for entrepreneurship that reduces the cost of capital for businesses that lack easy access to public equity markets".
"The bill from Congress has been well thought out and developed over several years. The Senate version is a rush version that is poorly thought out and will greatly damage small businesses,"