It’s official: President Donald J. Trump put his signature on the landmark Tax Cuts and Jobs bill Friday that represents $1.5 trillion in tax cuts for some 80 percent of taxpayers in the most sweeping overhaul of the tax code since 1986.
He called the legislation a win for the middle class and a bill for jobs in remarks today:
Now, the construction industry and the administration are gearing up for an infrastructure package, which the president referenced in his remarks about the bill-signing today.
A few recaps: First, the bill is a big win for Republicans who passed the measures in both the House and Senate Wednesday without any Democratic support and sent it to the president’s desk soon after House and Senate conference committees ironed out the bill’s differences.
Among the many features of the bill that will help small and large construction firms: the retention of Private Activity Bonds for underwriting some construction projects.
“The fact that private activity bonds retained their tax-exempt status in the final tax reform legislation is viewed as a plus for institutional building and public works,” says Dodge Data & Analytics chief economist Robert Murray. He is still expecting modest growth in total construction activity in 2018 and that the tax bill will play a role in shaping the pattern of activity.
Assuming that economic growth is boosted by the corporate tax cuts, he adds, the “likely beneficiaries would be commercial building and multifamily housing, although there’s also concern that more limited deductions for state and local taxes could dampen some of the growth expected for single family housing.”
On the business side, it lowers the corporate tax rate from 35% to 21% and lowers the tax on repatriated profits to 8% (15.5% for cash). The legislation will pay off in a big way after the tax-avoiding technique of parking profits offshore became widespread, notes The New York Times. The tax bills “would allow companies to bring nearly $3 trillion in profits home, at greatly reduced tax rates.”
A critical change that impacts construction industry contractors involves the pass-thru rate on businesses that incorporate as S-corporations, partnerships, LLCs, and sole proprietorships, which is how many firms in construction are organized.
For their first $315,000 of joint income, according to the House and Senate Conference Committee’s legislation backgrounder, the bill generally provides a deduction for up to 20% on business profits – reducing their effective marginal tax rate to no more than 29.6%.
Another big deal for many mid-sized contracting and construction firms was the repeal of the Obamacare individual mandate in the bill.
Constructions and firms are seen benefiting from these key features in the bill:
- Immediate expensing of capital investments, which allows businesses to immediately write off the full cost of new equipment.
- Allows small businesses to write off interest on loans. This will help small firms looking to expand or hire workers for a construction industry facing a labor shortage from project managers to key building trades skills such as welders.
- It also repeals the individual mandate under Obamacare, which mandated individuals buy insurance or face a fine.
Another key feature that will definitely make a difference to building trades workers are the standard deductions.
The bill “increases the standard deduction to protect roughly double the amount of what you earn each year from taxes – from $6,500 and $13,000 under current law to $12,000 and $24,000 for individuals and married couples, respectively.”
President Trump had promised to unveil his proposal for a massive infrastructure package as soon as Congress passes an overhaul of the tax code.
Trump administration officials have been meeting with infrastructure and transportation groups over the last two weeks about the infrastructure plan the president is supposed to unveil in January, possibly around the time of his State of the Union address on Tuesday, Jan. 30, says TheBondBuyer.com.
“They’re serious this time, I think,” said Jeff Davis, senior fellow and editor of a weekly news report at the Eno Center for Transportation.
As Congress made quick progress on taxes, administration officials recently began trading ideas with lawmakers about the infrastructure effort, Rep. Sam Graves (R-Mo.) told TheHill.com’s Melanie Zanona in late November.
“White House tech policy adviser Reed Cordish said at an Internet Association conference that the administration currently has a detailed, 70-page memo of infrastructure principles,” TheHill.com reported. Cordish said the White House document, which is still being finalized, will be submitted to Congress and serve as a building block for lawmakers to draft an actual legislative package.