What Will Trump’s Tax Plan Do for Franchisees?

May 4, 2017 | General

Last week, the Trump Administration released a one-pager outlining the broad details of his proposed tax plan for both individuals and businesses. Some crucial questions remain unanswered but we have a start. While everything prior to the release of this information was speculation, we have some points to go on. So what will these details mean for franchise owners and operators? Let’s take a look:

What the administration has in the way of a theme for this plan is steep tax cuts, both for individuals and businesses. Yet many analysts remain skeptical that the cuts would help the economy overall. Treasury Secretary Steven Mnuchin and the administration’s director of the National Economic Council, Gary D. Cohn, presented the information in bullet point form to reporters.

In prepared remarks, Mr. Cohn stated, “We have a once-in-a-generation opportunity to do something really big. President Trump has made tax reform a priority, and we have a Republican Congress that wants to get it done.”

But what does the plan have to offer businesses? Here’s the good part…

The proposal the administration laid out calls for slashing the business tax rate from 35 percent (the current rate) to 15 percent. This would affect businesses both large and small. Under the deal points, corporations also wouldn’t have to pay taxes on any foreign profits—good news for global franchise partners.

Additionally, any corporations who have global investments would also get a unique, one-time chance to re-home cash currently parked overseas. Though on this deal point, the proposed plan did not indicate a minimum amount or rate to be considered.

Mnuchin was very optimistic with his remarks to reporter’s questions, stating, “This [plan] will pay for itself with growth and with reduction of different deductions and closing loopholes. The economic plan under Trump will grow the economy and will create massive amounts of revenues, trillions of dollars in additional revenues.” Specifically, the administration believes that the proposed tax plan has the potential to kick-start the economy into increasing at a rate of three percent each year.

Lastly, the proposed tax cut plan specifically calls for “a territorial system to level the playing field for American companies,” dovetailing nicely with a component of a previous House Republican tax cut plan allowing U.S. corporations to use domestic profits as a guideline for paying taxes.

The entire plan was met with a healthy dose of skepticism, and not just from Democratic opposition. Several economists believe that the proposed details may not generate the growth promised or expected. The latest word from Capitol Hill is that the tax cut reform package may not even appear on their radar screens prior to August of this year. Which gives us plenty of time to ruminate on how it will affect the franchise industry as a whole. 

So stay tuned!

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