Former Governor Jeb Bush is following through his tax plan for 2016 that will bring a "dramatic reform of our tax code" inspired by the low- tax state of Florida.
According to orlandosentinel.com, Bush tax plan will give more profit to businesses and tax payers to encourage them to invest "on the belief that tax breaks spur sustainable growth."
Tax- cut advocates in Florida backed up Bush's plan and praised his governance that helped the economic growth of their state. However, critics said that Bush tax plan as another failed try in "trickle- down economics." They said that the tax cuts will only help the rich "at the expense of the rest and left Florida's safety net in tatters when the economy went bust soon after he left office in 2007."
In his efforts to regain his place as the frontrunner for president of the Republicans, Bush enhances his credentials as a conservative Republican who brought large tax- cuts in the history of Florida. He said, "I'm a disrupter. That's what I did when I was governor of Florida. We cut taxes every year - and we didn't have an income tax to cut - totaling $19 billion." He also added that his tax plan will double the country's economic growth rate of 2 percent a year.
In a report by forbes.com, Bush 2016 tax plan has one provision that may bring shock to real estate and financing small business market. The provision says "Generally, businesses would no longer be able to deduct interest payments" which is seen to be a proposition to another proposal.
"Under the proposal, businesses could fully expense all new capital investments, an approach that seeks to remove taxes on marginal investment returns. This would simplify the tax code and significantly increase incentives to invest in new machines, equipment, buildings, and other structures."
Some words in the stated proposals are quite vague in context like the "generally" that covers what exactly and how to identify a capital investment as new which can mean a lot different when it comes to real estate market. Does new equipment for the business is considered "new" or does it have to be really brand new investment? The report also said "does the expensing apply to capital investments that would not be depreciable under current law such as land and does it apply to intangibles?"
Regardless of the new tax plan's benefit, the transition from one tax plan to another might be devastating. After all, The Tax Reform Act of 1986 greatly affected the real estate industry. In a 1991 article in the CPA Journal, Roy Cordato wrote:
"The Tax Reform Act of 1986 has contributed to the decline of the real estate industry. The changes that have contributed to the decline of the industry include the elimination of the capital gains tax differential, the increase in the period for writing off taxes for depreciable real property, and the limitation of the deductions of passive investment losses. These changes have reduced the market value of real property, created an incentive for divesting real property, increased the difficulty of divesting real estate, and reduced the attractiveness of investing in new housing and construction."
Hopefully, clarification and more details will shine more light on the path of this new tax plan.
