Naples, Fla. — Michael Devereux doesn't know exactly how the tax reform debate will play out. Right now there are similar but not exactly the same proposals being floating by President Donald Trump, the U.S. House and the Senate.
But Devereux is confident that U.S. manufacturers will — eventually — benefit from lower tax rates and favorable expensing for capital investment.
“I don't think we're going to see a bill that's like any three of those plans, but an amalgamation,” he said.
Devereux, a partner at St. Louis-based Mueller Prost LC who coordinates the firm's tax incentives program, explained the financial impact of tax reform on plastics companies at the Plastics News Executive Forum.
Devereux said the House of Representatives version of tax reform would have a flat corporate tax rate of 20 percent and a maximum rate of 25 percent for S corporations, partnerships and LLCs — all popular ownership structures for plastics processors. It also would repeal the alternative minimum tax.
But the big potential windfall for manufacturers from the House plan is tax relief for capital expenses.
“It would allow the immediate expensing of your equipment. That is really, really significant,” Devereux said. It would allow for full, immediate expensing of things like buildings and intellectual property.
“It's just like double bonus depreciation,” he said.
Trump's proposal is similar to the House plan, except that the president is calling for a top corporate tax rate of 15 percent, Devereux said. Trump also wants a one-time repatriation of business money held in other countries.
The Senate tax reform proposal is likely to include infrastructure spending or the expansion of the child and earned income tax credits, in “horse trading” to entice Senate Democrats to support the bill, Devereux said.
He said tax reform will take time as the last major tax reform package came in 1986, but the work began in 1982.