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Sunday, November 16, 2014

The Election, 114th Congress and Fate of Tax Reform

What does the change in majority party in the Senate for the 114th Congress mean for tax reform, and perhaps for any tax legislation?

An op ed in the Wall Street Journal on November 5, 2014 by Congressman Boehner and Senator McConnell, states that the Republican controlled Congress will address many challenges including "The insanely complex tax code that is driving American jobs overseas."

What might that mean?  A few possibilities:
  • Nothing. Complexity is not a bi-partisan issue. There is no contrary argument to the statement that our federal tax law is too complex.  So, why hasn't the complexity been addressed in recent years rather than only making the law more complex?
  • Action on expired provisions.  I think we may see the 113rd Congress extend all of the 57 expired provisions for one year (through the end of 2014) and then the 114th Congress will decide which it really wants and which it will keep temporary. I'd be surprised if any will lapse other than the two that related to specific disasters.
  • Comprehensive tax reform.  A lot of work has been done on this topic in the past four years - hearings, working groups, proposals and even Congressman Camp's legislative language for revenue-neutral reform with lowered rates for both individuals and corporations. I think reform is easier for a second term president.  And, there is some common ground - the desire for simplification, international reform (although not entirely common ground), a lower corporate tax rate, and some administrative reforms to reduce the tax gap and reduce identity theft.  
We'll see.

What do you think?

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