News on the 2002 employment change and NAHB's housing forecast.
Competing economic packages introduced last week by President Bush and House Democrats would have varied impacts on construction. The President's plan would make permanent tax changes. The centerpiece is a proposal to tax corporate income once, at either the firm or shareholder level. Although often described as an exclusion from individual income taxation of dividends paid by corporations, it is more nuanced. Because this change would apply to closely held as well as public companies, it might induce more firms to pay out earnings instead of retain them. Some S corporations and partnerships, which are not taxed at the corporate level, might decide to change (or revert) to corporate form, which generally is easier to use for changes in ownership interests. On the other hand, the proposed speedup (to January 1, 2003) of individual rate cuts now scheduled for 2004 and 2006 would ease taxes on S corps and partnerships. Articles from recent Internal Revenue Service Statistics of Income Bulletins (www.irs.gov/taxstats/article/0,,id=97067,00.html) show that in 1999 (the latest year available) there were 247,000 C corporations in construction, 334,000 S corporations and 128,000 partnerships (and 2,284,000 individual sole proprietorships).
The President's proposal also would increase the amount of equipment that can be expensed, or deducted immediately, by businesses making small amounts of investment. Firms that buy less than $400,000 of equipment could expense $75,000, up from $35,000 for firms that buy less than $325,000.