President Obama’s proposal to lower Federal C corporate tax rates by eliminating so-called tax preferences speaks favorably of tax proposals in the Report of the President’s Advisory Panel on Federal Tax Reform (2005 Report), and in the President’s Economic Recovery Advisory Board – The Report on Tax Reform Options: Simplification, Compliance, and Corporate Taxation (2010 Report).
These reports specifically recommended pass-through entities, such as S corporations, be taxed as C corporations, if the receipts of the S corporations are greater than a fixed amount. (The 2005 report the amount was just $10 million).
President Obama’s proposal also argues that S corporations should not have an advantage over C corporations.
The 2005 Report and the 2010 Report also both suggest repealing all ESOP tax benefits, most in the law since 1984.
“I find it incredulous that the President travels the country talking jobs, jobs, jobs, yet his corporate tax reform policy will stifle the best jobs sustaining program in the U.S. For example, the 2010 General Social Survey found that less than 3% of employees of companies with employee stock ownership, which include the ESOP model and other forms of employee stock ownership, were laid off in 2009-2010 compared to a 12% rate for employees without employee stock ownership,” said J. Michael Keeling, president of The ESOP Association. “My gosh, why does the Administration want to cut back on a program that creates companies that are more productive, more profitable, in the vast majority of instances, and provide sustainable jobs that are locally-controlled.”
“We look forward to making the case for ESOPs to Congress and the media in light of this proposal from the Administration,” said Keeling.
If you would like copies of the 2005 and 2010 Reports, please use the links below:
Report of the President’s Advisory Panel on Federal Tax Reform (2005 Report) – see page 129
President’s Economic Recovery Advisory Board – The Report on Tax Reform Options: Simplification, Compliance, and Corporate Taxation (2010 Report) – see page 74 – 77