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Sunday, February 9, 2014

Broken Tax Code Offered as Reason for Reform

House Ways and Means Tax Reform Website
The House Ways and Means Committee has a new website to promote tax reform. There is also a two minute video. The three reasons for reform are interesting as to what they might mean.

1. Make the Tax Code simpler and fairer. The video notes that the getting "rid of junk" in the Tax Code would reduce it by about 25%. So, what does "junk" mean?  I think there are several special rules that do not need to be in our tax law, but I'm doubtful as to whether they are considered part of the "junk." For example, there is no reason to allow for interest expense deductions for a home equity debt or debt on a vacation home. These are also costly deductions. But, they seem to be popular, even though they are claimed by less than one-third of individuals.

2. Get rid of "handouts." There is a reference in the video about make the system more efficient. So, this would imply that rules that benefit special industries might go away, such as special tax rules for the oil and gas industry.

3. Make the system more accountable. This includes closing "loopholes."  I'm not sure there are many loopholes in the tax law - that is, rules that are being used in unintended ways. However, the term also tends to be used to describe something lawmakers want to get rid of.

Besides making the system simpler and fairer, one more goal offered "is to strengthen the economy so there are more jobs and bigger paychecks for American families." That all sounds good, but details are needed.

Tax reform was reported to be an important agenda item at the January retreat of the House Republicans (see Tax Analysts' article).

So, despite an upcoming leadership change in the Senate Finance Committee with Senator Baucus becoming ambassador to China (see 2/6/14 USA Today article), it looks like tax reform is alive and well.  I expect though that the timeline has been extended.  We'll likely see more details about the generalities laid out in the new video.  We'll see.

The San Jose State MST Program is co-sponsoring a tax policy conference on February 28 in Santa Clara to help attendees get a better handle on what's happening with tax reform and how to figure out what it might mean to your company. For more information on that, see

What do you think about the video messages?

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