Thursday, February 8, 2018
Daniel Shaviro (NYU) presents The Disgraceful U.S. Passthrough Rules at Duke today as part of its Tax Policy Workshop Series hosted by Lawrence Zelenak:
Bad as the passthrough rules looks by themselves, in some ways they look even worse when paired with the lower corporate rate and absence of significant safeguards against using corporations as tax shelters. From now on, anyone who is thinking of running a business or being an independent contractor, and for whom the dollar stakes are large enough, is going to have to think seriously about both the C corporation and passthrough alternatives. Tax advisors will need to be consulted, and large bills run up (although the tax savings may more than pay for these). Had the Congressional Republicans in 2017 expressly set out to make the tax system a far more intrusive nuisance and headache (albeit, in the guise of tax planning opportunities) than it already was, they could hardly have done “better” than they did.
The passthrough rules ought to be repealed as soon as possible. Even if this were to happen, however, the dark message that they send about contempt at high levels of government for basic principles of competence, transparency, and fair governance will continue to linger.