The sweeping tax bill approved by congressional negotiators over the weekend is expected to have a dramatic impact on American industry. Heavy manufacturing and many real estate developers have railed against the loss of cherished tax incentives. But retailers and technology firms, which have long felt overtaxed, generally have cheered the move to lower overall corporate tax rates. While the enthusiasm of some early corporate tax-reform advocates has waned, some opponents have found the process less painful than anticipated.
With approval of a final bill by Congressional negotiators--and expected approval next month by the full House and Senate--American business is now bracing for this massive overhaul of the nation's tax system. Here is a look at how various industries will be affected:
To the extent that the conferees' tax measure reduces incentives for farming that is motivated solely by tax benefits, the nation's agricultural sector will probably be better off in the long run, said Dean Kleckner, president of the American Farm Bureau Federation, the nation's largest organization of farm families.
"Anything that discourages outside investment in agriculture is good," said the Iowa hog farmer.
Among provisions that will stymie "tax-code farming" are elimination of various provisions that have been at the heart of tax shelters. The bill also would limit the writeoff of seed and feed bought for future use--a technique that some "tax code farmers" have used to shift taxable funds from one year into another.
Kleckner called the conferees' effort "a generally good bill, moving in the right direction." Lower top individual tax rates would be positive for family farmers, he said.
"Long-term, the bill should be good," he said, "but in the short term it may prove disruptive to farmers who have made plans that this bill will change."
But, Kleckner said, new tax laws inevitably hit different farmers differently. For example, loss of the reduced tax on capital gains will hurt farmers preparing for retirement by selling off their farms and moving into cities.
"We're disappointed that capital gains were written off altogether," he said. That loss, Kleckner added, will be moderated by the lower tax rates of 15% and 28%.
"Some things have to be given up" to obtain lower rates and a simplified tax structure, he said.
Among modest victories for farmers was allowing them and other self-employed taxpayers to deduct 25% of their health-insurance costs. The Farm Bureau had pushed for 50% to come closer to equity with other taxpayers in this area, he said, but the measure at least establishes the principle of the deduction.