The winners and losers in the new federal tax plan

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KANSAS CITY, Mo. -- For every winner under the country's new tax plan, there will also be workers who face bigger bills.

In some ways, the federal tax changes mirror recently repealed tax cuts in Kansas, where income taxes were eliminated for limited liability corporations and sole proprietors.

Business has been booming at Strategos International. Members of the Grandview-based security and protection firm travel across the nation to teach people in schools, churches and workplaces how best to respond to intruders.

"We've been in business 15 years, and we've seen progressive growth since we've started because the world has gotten worse as we go along," Strategos President Vaughn Baker said.

As a limited liability corporation, Baker has taken action to maximize the benefits of federal tax reform and pass them along to his 10 employees.

"We actually have been able to provide a bonus, a year-end bonus, for the last year for our employees, around $2,500," he said. "We actually put a 401k benefit program in place for them before the end of last year, based on anticipated savings in taxes for 2018 and beyond."

Some companies, like CBIZ, that provide support services for small businesses say bonuses are a showy political response to the tax cut. The Kansas City firm is more interested in tracking how the breaks fuel an economy already in a growth cycle, working at full labor capacity.

"So what may occur is a rush to automation by employers because they can't access the labor force they need," Phil Noftsinger with CBIZ said. "What may also occur is more urgency around immigration reform so we can increase our supply of workers, and you'll probably see some pretty significant wage growth."

New federal rules allow qualifying businesses like Baker's to reduce their taxable income by 20 percent.

"If you are a qualifying business and you had $100,000 in income, now you might only have to include $80,000 as taxable, depending on the type of business," said Andrew Wagner, a senior tax adviser with H&R Block.

In KCK, Kelly McCracken set up her dental practice as an LLC to make advantage of tax breaks that disappeared in the Sunflower State. Now she said federal changes might make her business, Amazing Smiles, more profitable.

"Twenty percent! That's a lot in any business or for anybody`s income," she said.

McCracken said she hopes with that savings she'll be able to hire another employee and offer new services.

After consulting with his accountant, Baker has also hired a new employee that starts this month to help develop more business for the firm.

Kyle Nagy, a metro accountant, agreed with that hiring move.

"If you have a need and you have a competent staff person you can find, take advantage of that savings," he said.

The Tax Policy Center estimates eight out of 10 households will see their taxes drop, but five out of 100 will pay more.

"Where it's going to affect individuals the most are ones who have a significant amount of expenses that they were typically able to deduct, which they won`t be able to deduct going forward," Nagy said. "People that may have a lot of travel that they do, a lot of driving around the city -- they incur a lot of mileage, and the employer is not reimbursing them. They are going to see a pretty significant impact in that regard."

People like truck drivers, airline pilots and, yes, even security consultants at Strategos, who travel as part of their job but are not reimbursed for all of their expenses, could face bigger tax bills.

"I'm encouraging a lot of my clients to really consider how they are paying employees, especially ones who have a lot of expenses, and perhaps consider reimbursing employees to the full extent that the law allows in lieu of maybe paying them a larger salary," Nagy said. "In doing so, it will save the employee and employee money."

That's what Baker decided to do at Strategos because he realized that while tax reform may boost his business, it won't work if his employees end up footing the bill.

"We have changed the rates at which we reimburse, so it benefited them and us both," Baker said.

Despite critics' concerns that business owners will only use tax cut benefits to line their own pockets, owners like McCracken and Baker said it's more important to reinvest because, in an increasingly competitive environment, they believe their success depends on continuing to grow.



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