Everyone can agree that pro-growth tax reform would be welcomed in communities across our country; the last time the nation underwent a tax overhaul was 30 years ago and much has changed in the time since.
The Trump Administration, together with Congress, has the opportunity to enact legislation that can transform communities for the better, spur investment and new development, while avoiding the pitfalls of the Tax Reform Act of 1986.
Tax reform must take into account not only the potential for growth from corporations but also growth opportunities in our communities. As well, any restrictions on the treatment of pass-through entities (including partnerships, LLCs, LLPs and S Corps.,) capital gains, Section 1031 like-kind exchanges, depreciation and business interest deduction must be carefully examined in relation to other changes in the tax code.
Like-kind exchange is used across the country to promote the efficient use of capital and cash flow to allow taxpayers the flexibility to shift to more productive like-kind property, change geographic location, diversify or consolidate holdings, or meet other changes in business needs, while maintaining the current treatment of real property.
The Trump Administration and Congress must be especially careful considering potential changes to the business interest deduction because real estate relies heavily on affordable and accessible debt financing to maintain a balanced finance structure.
Changes to the deduction for business interest could have far reaching consequences. The impact will not be limited to just real estate, as local entrepreneurs also rely on access to affordable debt to start and grow their businesses.
Finally, states across the country — including Arizona — are losing millions of dollars each year in tax revenue due to Congress’ failure to close the sales tax loophole for online sellers.
In 45 states, when a remote retailer does not collect sales tax at the time of purchase, the consumer is responsible, by law, for remitting the use tax. Consumers are mostly unaware of this obligation and as a result, local merchants suffer from a government-sanctioned price disadvantage while our local schools and first responders suffer from an unnecessarily eroding sales tax base.
Fixing this loophole means simplifying an existing tax requirement, not creating a new one.
As the new Administration and Congress chart the roadmap ahead for tax reform, they must make sure that their growth agenda is aimed at investment in our local communities. The tax reform efforts we work together on now will help shape America’s economic growth for decades to come.
Greg Valladao, managing director of Capital Markets and Retail Investment Sales at Cushman & Wakefield.
