BROOKFIELD — The head of the Brookfield-based Independent Business Association of Wisconsin hailed the passage of the federal tax reform bill on Tuesday, saying it will put more money in the pockets of small businesses and their employees.
The Republican-drafted legislation, which slashes the corporate income tax rate — taking it from 35 to 21 percent — passed the House of Representatives largely along party lines by a 227-203 vote Tuesday afternoon. Senate Democrats, however, invoked a parliamentary procedure, arguing that three provisions in the bill violated Senate rules and must be removed. After that action, the Senate approved the bill early this morning on a 51-48 party-line vote.
Therefore, the measure must return to the House today, where it is virtually certain to be approved again.
“Any time you can put more money back into corporate hands, that’s going to trickle back down to not only workers, but expansion of equipment and research and development,” said Steve Kohlmann, executive director of the Independent Business Association of Wisconsin, which represents businesses with 50 or more employees.
Kohlmann was joined in his praise for the legislation by U.S. Rep. Jim Sensenbrenner, R-Menomonee Falls.
“Today’s action by Congress is a huge step toward relief from the burden of an over-reaching government,” wrote Sensenbrenner, who represents Waukesha, in a statement. “Individuals, families, and businesses across Wisconsin and across the country are in a better place than they were yesterday.”
Criticism and praise
The massive $1.5 trillion tax package is expected to touch every American taxpayer and every corner of the U.S. economy, providing tax cuts for businesses and the wealthy, as well as for middle- and low-income families. The top tax rate for individuals would be lowered from 39.6 percent to 37 percent. Many analysts have argued that the legislation will also increase the national debt. Proponents, however, have suggested its positive impact on the economy will offset the increased deficit.
House Speaker Paul Ryan, R-Janesville, said the results of the legislation, which doubles both the child credit and the standard deduction used by most families, would make it popular.
While individual tax cuts would expire in 2026 in order to comply with Senate budget rules, tax cuts for corporations would be permanent.
Democrats have called the bill a giveaway to corporations and the wealthy, arguing that there is little likelihood that business owners will use their gains to hire more workers or raise wages.
But Kohlmann said Tuesday that businesses will use the money they pocket to reinvest in their companies, including human resources.
“It’s not only research and development, but it’s being able to hire workers, pay benefits to those workers, and then offer higher wages to retain those workers, and attract more workers,” he said. “There are three things businesses are constantly fighting with: taxes, excessive regulations, and health care. So we have chipped away at a big one.”
Waiting on details
Tom Fotsch, a part owner and chief operating officer at Waukesha-based computer and software manufacturer EmbedTek, said he wasn’t yet sure what the what law might mean for his company, but said he believed the “overall economic impact of the legislation” was positive.
EmbedTek is a closely held corporation and it hasn’t been clear what changes will be in store for those types of corporations, because the Senate and House bills have different proposals, Fotsch said.
“It’s one of those things where the devil is in the details,” he said. “It makes it very difficult to try and plan, when we really don’t know what was in the legislation. That’s a little frustrating, but, generally the things that they are saying are positive.”
On a personal note, Fotsch said he’s glad to see what he called “major steps toward trying to simplify the tax code” for individuals, noting it could pave the way for more people being able to do their own taxes.
“I think that’s great,” he said.