Will We Get Tax Reform?
We are in the camp that this would be beneficial if the system is simplified and tax rates lowered, but we do worry about reform disguised as a tax increase.
This is an interesting post from the law firm Holland & Knight yesterday:
In his State of the Union speech last month, President Obama called for “bipartisan, comprehensive tax reform,” while the chairmen of the House Ways and Means Committee and Senate Finance Committee — Representative Dave Camp (R-Mich.) and Senator Max Baucus (D-Mont.) — have each pledged to pursue an overhaul of the tax code in 2013. Further, the Government Accountability Office and the Internal Revenue Service’s National Taxpayer Advocate continue to urge Congress to prioritize tax reform. Both offices have recommended that Congress reexamine the deduction for state and local taxes and the exclusion of interest on municipal bonds as part of comprehensive tax reform.
Lawmakers recognize that, unlike the last major rewrite of the tax code in 1986 — when they were able to finance rate reductions largely by eliminating widespread tax shelter abuses — major tax reform today will likely require repeal or limitation of popular and longstanding tax benefits that are deeply embedded in our society and financial markets. As Senator Baucus noted last year, “We know tax reform won’t be easy. We will need to slay some sacred cows.”
Few cows are more sacred than the deduction for state and local taxes and the exclusion of interest on municipal bonds. The Joint Committee on Taxation estimates that, for 2013, tax expenditures resulting from the deduction of state and local taxes and the exclusion of interest on municipal bonds will be $68.6 billion and $25.7 billion, respectively.
We will be paying close attention to how this evolves….