As Congress and the Trump administration turn their attention toward tax reform, the Independent Community Bankers of America (ICBA) offered recommendations for reforming the nation’s tax code in a new whitepaper titled “ICBA Principles for Tax Reform.”
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The whitepaper notes ICBA’s support for modernizing and simplifying the tax system, characterizing its current state as complex and inefficient. The organization is advocating that legislators enact tax reform measures aimed at strengthening communities, promoting local economic growth and facilitating job creation nationwide.
“Our nation’s tax code impacts the strength of our economy and tax reform will require important and fundamental choices about our economic future,” ICBA President and CEO Camden Fine said in a press release. “The goal of ICBA’s tax reform whitepaper is to help clarify the choices that lie ahead. The views and recommendations set forth in the paper were developed with input from community bankers nationwide. Their unique perspective on tax reform in this debate is centered on strengthening the community bank-small business partnership, which is the foundation of local economic growth and prosperity.”
The association said since community banks play a critical role in providing credit to consumers, small businesses, farmers and ranchers, ICBA is particularly committed to maintaining the interest deduction for such borrowers.
“The use of debt financing and the business interest deduction helps create local businesses and fuels their growth, creating jobs and economic empowerment at the community level,” Fine said.
The administration is considering several options for reforming the tax system, as detailed by a recent report by Politico, including a plan that would cap the mortgage interest deduction for homeowners, eliminate borrowers’ ability to deduct state and local taxes and eliminate businesses’ ability to deduct interest, “while also phasing in so-called full expensing for small businesses that allows them to immediately deduct investments like new equipment or facilities,” the website reported.
ICBA encouraged policymakers to review its list of community bank tax reform proposals, which it said are intended to “create an environment for economic growth and prosperity for future generations.” They include:
- Allowing businesses to continue to fully deduct interest expense as an ordinary and necessary cost of doing business, considering the fact that changes could adversely impact the financial well-being of small businesses, farmers and ranchers.
- Providing parity in taxing financial service providers, such as tax-exempt credit unions and Farm Credit System (FCS) lenders that have assets totaling multiple billions of dollars, and continuing to expand their presence in markets that taxpaying community banks traditionally serve.
- Modernizing Subchapter S of the tax code to better allow community banks to raise capital.
- Lowering the marginal tax rates on individuals along with C-corporation and S-corporation businesses.
- Repealing the estate tax, which ICBA believes “endangers the intergenerational transfer of many community banks and small businesses served by community banks.”
- Preventing new taxes or fees that specifically target the commercial banking sector or its customers, which ICBA contends “distort the market and generate counterproductive outcomes.”