In the March 29, 2013 Kiplinger Tax Letter, it was reported that “One thing is clear about tax overhul: Lawmakers will include compliance measures”. I believe it’s been said many times and Kiplinger reiterated in the 03/29/13 newsletter, that Congress will be looking to broaden the “tax base so that the maximum income tax rate can be lowered and the number of tax brackets can be trimmed”, which will supposedly cause Congress to look at “compliance changes” to help increase revenues yet shrink rates and reduce complexity. Some of the things mentioned in the newsletter:
In the April 26, 2013 Kiplinger Tax Letter, it was reported that “investors should pay attention to tax reform” with Kiplinger expecting “gains and dividends” to be “taxed as ordinary income” in any “final tax overhaul measure”, noting that ‘in the 1986 tax reform law, the tax preference for long-term gains was axed’, which leads the tax analysts at Kiplinger to feel there is precedent for a change in how dividends and capital gains are treated in this round of tax revisions. The analysts at Kiplinger also feel that “stock sellers would lose the right to use the specific identification method” for stock sales, “in which they direct that the highest-basis stock be sold first”, limiting capital gains, “instead being forced to use the average basis of shares” method.
On Pages 18 & 19 in the July, 2013 issue of Accounting Today, Roger Russell spells out some of his thoughts on tax reform in his article: “Handicapping the chances of real change to the system. Russell noted that “actual proposals introduced are the Fair Tax Act of 2013 (H.R.25 and S.122), the Flat Tax Act (H.R.1040) and the Simplified, Manageable, and Responsible Tax (S.M.A.R.T) Act (S.173)”. Finally, “the Tax Code Termination Act (H.R.352) would effectively repeal the current Tax Code and require Congress to write a new one”. Frankly, the way Congresses (that’s plural) and Presidents (also plural) have been acting over the past MANY years, with the above particular pieces of legislation in mind, it would appear folks in Washington are busy writing pieces of legislation that are set to go nowhere. According to George Pieler, policy consultant and former tax counsel to the Senate Finance Committee, “the likelihood of tax reform is problematical” … “depending on how you define it”. Pieler feels “wholesale, comprehensive reform” is unlikely in the short-term, primarily because “there’s a president in office who is absolutely opposed to cutting rates, so almost anything that will be called reform these days will be a revenue raiser”, with Pieler adding “you could swap things off within a set of exemptions, but that would just be setting interests against each other”. He also added that “putting tax reform on the agenda is a good campaign fund raising move for both sides going into the 2014 and 2016 elections”, and that both House Ways and Means Committee Chairman Dave Camp and Senate Finance Comittee Chairman Max Baucus are seriously interested in getting something accomplished as their legacies; however, they have their work cut out for them based on all the bickering in Washington these days.
In his testimony before the Senate Budget Committee, Brookings senior fellow Adam Looney said that “reform will be more difficult today than it was in 1986″. Back in 1986, tax rates were lowered substantially and lost revenue restored by cutting tax breaks, deductions, exclusions, and other so-called tax expenditures”. In the 27 years since then, Looney states “the economic context has changed”, with tax reform being all about compromise, and he feels there “doesn’t seem to be a lot of capacity within Congress to compromise” right now, which, in my opinion, is a heck of an astute comment based on all the bickering and “one-ups-manship” we see in Washington, day after day after day. Roger Harris, former chair of the IRS Advisory Council, and currently the president of Padgett Business Services, the first witness to testify at the hearings, stated he is “optomistic that the stage is being set for progress on tax reform and tax simplification”, that “there is an undercurrent of activity generated by lawmakers on both sides of the aisle”, giving “hope that tax reform has a real chance”. In summation, it should be quite interesting to see what actually comes out of Washington concerning the very important subject of tax reform, seeing that the President and the folks in Congress can’t seem to get much of anything accomplished these days.