Written by Mark Cook
There is much talk these days about tax reform. Will it be a comprehensive overhaul like the 1986 Tax Reform Act, or the 2016 House Republicans ‘A Better Way’ proposal, will it be revenue neutral or debt funded, or will it be a modest attempt at simplification like reducing tax rates and limiting deductibility of such items as state and local taxes, charitable deductions and mortgage interest. Whatever the outcome, the clock on 2017 may be running out.
A quick look at the remaining 2017 legislative calendar provides some insight into the prospects for a significant legislative overhaul of the tax system, a task so daunting that it has happened since 1986.
From July 11, there are only 13 legislative days until the August recess. Things get interesting when Congress returns in September. They will have until September 30th to agree on funding the government for the next fiscal year, and in the current political environment, this will likely consume most of September particularly given the debt ceiling will also need to be raised. Additionally, the budget resolution may be used for tax legislation if the Republicans want to pass without Democratic support. This comes with a 10 year sunset provision and Congressional Republicans are open to extending but this would take more time. Time they don’t have.
Both houses of Congress are not in agreement on tax reform. A cornerstone of the House Republican plan is the Border Adjustability Tax – which is shorthand for saying imported goods are not deductible. The Senate isn’t on board. And without it, the revenue neutral aspect of tax reform is at risk. This is all exacerbated by the need to get health care passed because the savings from this effort will be used to lower the tax rates.
With all of these hurdles, comprehensive tax reform seems more and more unlikely. If we see tax reform in 2017, it will likely be a watered down version. The forecast diminishes in 2018 for several reasons including the Congressional mid-term elections.
Mark G. Cook, MBA, CPA, CGMA
SingerLewak, Tax Partner
Mark has more than 27 years of tax experience including more than 16 years with PricewaterhouseCoopers as a tax partner, preceded by four years with Ernst & Young. His clients have ranged in size from emerging small and mid-cap companies to Fortune 500 businesses. Mark’s expertise includes corporate planning, acquisition due diligence and structuring, tax compliance, tax provision calculations, and structuring alternatives for private equity and venture capital participants. \