Senate Finance Committee Chair Orrin Hatch, R-Utah, acknowledged
last week that his corporate integration proposal is running into
difficulties that will postpone its release until at least
May.
Hatch is trying to reduce the double tax on corporate earnings by
providing a deduction at the corporate level for dividends paid to
shareholders. Hatch would then apply a higher rate on the dividend
income for the shareholders themselves and is considering imposing
withholding.
The proposal is being scored by the Joint Committee on Taxation,
and Hatch acknowledged that the complexity and ambition of the
proposal is creating revenue issues. It may be difficult to keep
the plan revenue neutral because so many corporate shareholders are
tax-exempt entities like pension plans, although a withholding tax
could address this issue. Hatch is also discussing applying
withholding to interest income to maintain parity between debt and
equity financing.
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