Trump corporate tax plan could be a boon for advisory firms

For some advisers who structure their practices so that revenue is reported on their personal income tax returns, Mr. Trump's idea represents a significant tax break

Aug 18, 2016 @ 1:36 pm

By Mark Schoeff Jr.

Republican presidential nominee Donald Trump wants to tax all corporations at 15%, a rate reduction that could be a boon to some investment advisory firms.

For advisers who structure their practices so that its revenue is reported on their personal income tax returns, Mr. Trump's idea represents a significant tax break.

Currently, so-called pass-through entities, partnerships, limited liability corporations and S corporations are taxed at individual rates, which can be as high as 39.6%, the top individual bracket. Traditional corporations are taxed at a 35% rate.

Although Robert Braglia, president of American Financial and Tax Strategies Inc., doesn't support Mr. Trump for president, he does like Mr. Trump's corporate tax proposal. His advisory firm is set up as a pass-through.

He said that Mr. Trump's idea would spur economic growth.

“It would lower my taxes,” Mr. Braglia said. “It would help all businesses. It would help all consumers. It's a double benefit.”

Doug Stransky, a partner at Sullivan & Worcester, agrees that lowering taxes for small businesses, which he calls the top job creators, would “stimulate the economy.”

“It's a fantastic proposal,” Mr. Stransky said. “More money can go into the proprietor's pocket and can be put into the business.”

Democratic presidential nominee Hillary Clinton takes a different view, asserting that Mr. Trump's proposal would allow the wealthiest Americans to cut their tax bill by more than half.

“That would let millionaires and billionaires like [Mr.] Trump pay a lower rate than millions of hard-working families on this income,” a Clinton campaign fact sheet states.

Joseph Clemens, president of Wisdom Wealth Strategies, which is set up as an LLC, said that he favors lowering corporate rates but has misgivings about reducing them to 15% for pass-throughs.

He said that it could encourage “games” business owners play with firm structure to maximize tax benefits, while ordinary income remains taxed at a higher personal rate.

“I do have concerns about the fairness of this,” Mr. Clemens said. “It's already a gray area: What is income? What is dividends?”

With Mr. Trump trailing Ms. Clinton in most polls, the prospects for Mr. Trump's tax proposals and other ideas becoming policy are clouded. But ideas that are floated in the campaign could pop up again next year, if Congress undertakes broad tax reform.

One of the usual sticking points in such efforts is the disparity between the tax rate for traditional corporations and that for small businesses.

“The biggest thing [Mr. Trump's idea] would do is solve this incongruency in the tax code,” said Palmer Schoening, chairman of the Family Business Coalition. “It would end the scrum over tax reform.”

The outcome of the election will go a long way in determining how tax reform will unfold, with the scenario of a Clinton White House, a Republican House and a Democratic Senate providing the most uncertain atmosphere.

Mr. Braglia is holding out hope for a streamlined tax code.

“A simpler tax system would free people up to make better widgets rather than rearranging numbers on ledger sheets to lower taxes,” he said.

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