Dive Brief:
- A new U.S. Department of the Treasury report found that from 2007 to 2010, on average, construction companies paid a higher effective federal tax rate than businesses in any other industry, the Associated Builders and Contractors reported.
- According to the Treasury report, the construction industry paid effective federal corporate taxes at an average rate of 30.3%, while companies across all industries paid an average of 23.3%. Utilities paid the lowest average effect tax rate, at 14.5%.
- The ABC said that high tax rates are a burden on the continuing recovery of the construction industry and called on Congress to "enact comprehensive, meaningful tax reform" and lower effective tax rates for all businesses.
Dive Insight:
"Tax Day is a painful reminder to construction companies that they carry a larger tax burden than any other industry," ABC National Chair David Chapin said in a release.
In an opinion piece for The Hill last year, former ABC chair Pamela Volm echoed the organization’s concerns over construction business tax rates. Volm said the higher taxes the industry pays are a result of higher marginal tax rates, Obamacare surtaxes and relatively few available deductions.
She pointed to the fact that the construction industry is largely comprised of small businesses and the common pass-through structure of contractors — which means they pay taxes through the owners' individual returns — as the main reasons for its higher tax burden. The ABC emphasized the importance of including pass-through companies as well as corporations when discussing tax reform.
The Obama administration recently updated the President’s Framework for Business Tax Reform and expressed its goal of lowering corporate taxes by closing loopholes and reducing subsidies, yet broadening the tax base so as not to sacrifice any tax revenue. The 2016 Framework’s points of action aim to:
- Close loopholes and reduce subsidies that create such a disparity between industry effective tax rates and then lower the statutory effective rate to 28%
- Increase incentives for research and development, clean energy and manufacturing
- Introduce a 19% tax on foreign earnings to make up for companies that have moved operations or corporate headquarters out of the U.S.
- Simplify tax filing for small business and entrepreneurs
- Enact reform without adding to the deficit
