The Tax Policy Business Barometer tracks views on key tax policy issues from leading US tax executives and practitioners.
The Tax Council (TTC) and Ernst & Young LLP introduced the Tax Reform Business Barometer in 2013 to measure the business community’s perceptions on the prospects for federal business tax reform and other key policy issues. The Barometer has since evolved to encompass tax policy issues beyond tax reform, including trade, infrastructure and the US fiscal forecast.
This 18th Barometer tracks views reported from May 2 through May 10, 2019 by 96 leading US tax executives and practitioners. Results are based on an online survey conducted by EY’s Quantitative Economics and Statistics (QUEST) practice.
- Respondents are split on whether Congress will extend expired and expiring tax provisions this year: On average, respondents believe there is a 44% likelihood Congress will act in 2019 to extend these “tax extenders.”
Tax Cuts and Jobs Act (TCJA) implementation
- Technical corrections to the TCJA are unlikely before year end: On average, respondents believe there is a 25% likelihood that a technical corrections bill will be enacted before the end of 2019.
- TCJA’s temporary provisions will be extended - eventually: On average, respondents believe there is a 76% likelihood that the major temporary TCJA provisions will be extended at some point.
- Individual income tax provisions are the most likely to be extended: Of those who believe major TCJA provisions will be extended, nearly three-quarters (71%) believe that individual tax rates will be extended. Sixty-nine percent believe the 20% deduction for pass-through income will be extended.
- The more stringent earnings-before-income-tax (EBIT)-based interest limitation is likely to take effect as scheduled in 2022: Eighty percent of respondents believe it is at least somewhat likely the EBIT-based interest limitation will go into effect in 2022.
Impact of international tax changes
- TCJA’s global intangible low-taxed income (GILTI) provision has had the most impact on companies and industries: Eighty-eight percent of respondents believe the GILTI provision has had the most impact of all international tax-related provisions in the TCJA, followed by the Section 163(j) interest expense deduction limitation (63%), and the TCJA’s base erosion and anti-abuse tax (BEAT) (56%).
- Businesses are following “BEPS 2.0” closely: Of those respondents who are affected by the efforts of the Organisation for Economic Co-operation and Development (OECD) to address the challenges of digital taxation, the vast majority (78%) are following the changes closely or very closely.
Tariffs and trade policy
- A trade war is likely to cause a recession: Sixty-two percent of respondents believe that a trade war is at least somewhat likely to push the US economy into a recession, similar to the results from the September 2018 (62%) and January 2019 (68%) Barometers.
- Trade frictions are likely to continue this year and beyond: Many respondents (42%) believe that the current trade frictions and increased tariffs between the United States and its major trading partners will not begin to de-escalate until 2021.
- Respondents believe the Administration’s approach to China will be successful: Sixty-five percent of respondents think that it is at least somewhat likely that the Administration’s approach to trade policy and tariffs will succeed in getting China to reform its trade practices relating to intellectual property and forced technology transfers. The remaining 35% of respondents think the current approach is not very likely or not likely at all to succeed.
- Modeling tariffs is important for some: Fifty-six percent of respondents report doing some or extensive modeling on the impact of tariffs on their company, industry or market, while the remainder report doing no modeling on the issue.
- Deteriorating infrastructure is a problem for businesses: Eighty-five percent of respondents believe deteriorating infrastructure poses a problem for their business or industry.
- Respondents think increasing the gasoline tax is a good way to pay for infrastructure improvements: When asked to pick top funding choices, respondents overwhelmingly preferred a gasoline tax (82%) to other sources of federal funding for infrastructure projects, followed by a carbon tax (56%), and government borrowing (38%).
Federal government’s long-term fiscal outlook
- Respondents generally don’t think the federal government will address its long-term fiscal imbalance anytime soon: Respondents believe, on average, that there is a 58% likelihood that Congress will not enact any legislation within the next five years to address the federal government’s long-term fiscal imbalance.
- Increasing corporate income taxes is the most likely approach Congress will take to reduce the deficit: Seventy-three percent of respondents think Congress is likely to increase corporate income taxes to reduce the federal government’s long-term fiscal imbalance.