Forgotten Tax Issues - Let's Be Sure They Are Remembered

The Congressional Budget Office projects a $1.2 trillion deficit for 2009 (8.3% of GDP)! Even before the recession, falling home prices and 9% unemployment we were looking at significant budget deficits. That makes it even tougher to think that we can easily extend any of the 2001/2003 tax cuts that expire in 2010 or permanently "patch" the AMT to keep millions of individuals who should not be subject to AMT from owing it.

Even without the greater budget problems, there was a concern over how extending the tax cuts could happen given the high cost. I think that this is why President Bush was exploring tax reform (such as with his Advisory Panel on Tax Reform) - could the tax system be changed to avoid the need to deal with extending costly tax cuts?

I think there is still a desire to see how some of the tax cuts can be made permanent as well as implement some other changes such as a lower corporate tax rate.

Congress and the Administration have a lot on their plates:

• economic stimulus
• health care reform which likely (hopefully) will include looking at ALL of the funds and incentives available today for health care including those in the tax law
• energy/environmental changes - which will also likely involve the tax law
• dealing with expiring tax cuts

This all sounds like an opportunity for major reform - which hopefully can be coordinated rather than piecemeal.

AND - there are more issues - some of which I think have been forgotten, such as:

• corporate integration (it should be considered in any reduction in the corporate tax rate and any change in the capital gain/loss rate or structure)
• depreciation - the system is outdated
• worker classification - still unresolved since 1978
• penalty system - we've added more penalties in the last 10 years (there are over 100!) - is it working (after all, we have a $345 billion annual tax gap)

And, what about the topics of simplification and return-free filing?

It is time for reform and modernization of the federal tax system. To be effective, all of the issues need to be on the table. Many of these topics have been studied for years - by the government, academics and others - let's do something with all of this information!

For more information on the four topics noted above, please see a short article of mine in the AICPA Corporate Taxation Insider for January 2009 - Remebering Forgotten Tax Issues.

What do you think?