Don Keelan | Relax, for now: Tax reform will take time
If the delegation can take a page from CPAs, tax attorneys, and financial planners, you don't get worked up over what is the first pass at tax reform - it is a huge waste of time knowing that changes, deletions, and amendments will surely be forthcoming.
Nevertheless, what is revealing when one reads the massive pieces of proposed legislation, hundreds of pages, is how much our tax laws have penetrated into so much of our country's economic, business, social, personal, energy, nonprofit, and environmental affairs. These periodic tax law events, most times referred to as reform, are in no way reform at all. Instead, they continue making our tax laws more complex. True reform would be to scrap the existing Tax Code and start from scratch.
This, of course, would be disastrous in that our tax laws, in 2017, are such an integral part of our individual, business, charitable, foreign, educational, and cultural affairs that real reform is absolutely impossible.
To grasp just how far reaching the proposed changes are, below is just a sampling of what has been advanced as reform:
Section 3604, No tax-exempt bonds for professional stadiums
Section 3406, Termination of New Market Tax Credits
Section 3402, Repeal of employer provided childcare credits
Section 3404, Repeal of work opportunity tax credits
Section 3505, Repeal of credit for producing oil and gas from marginal wells
Section 4402, Extension of temporary increase in limit on cover over rum excise taxes to Puerto Rico and the Virgin Islands
Section 5103, Create an excise tax based on investment income of private colleges and universities
Section 1301, Repeal of limitation of itemized deductions
Section 1304, Repeal of deductions for personal casualty losses
Each one of the proposed Section changes, as well as the scores of other changes, has an army of lobbyists already lined up outside the office doors of the Congressional delegation - ready to do their clients' bidding.
For political purposes, our delegation makes it very clear that the proposed legislation will hurt the middle class and give huge breaks to the rich. Frankly, this does not come to the surface that clearly, except in a few instances.
Take for example Section 3406 above, the repeal of the New Market Tax Credits. One has to be in a fairly substantial bracket to have benefitted from this credit. This repeal will hurt Vermont where the tax credits have been used to advance development in economically depressed areas.
Eliminating the Estate Tax entirely (House bill has this and the Senate does not) will provide a big benefit to the wealthiest, according to some politicians. Currently, any estate under $5.5 million is transferred tax-free. Those individuals whose estates are large have already utilized every planning device available to avoid the death tax by transferring their assets to trusts and foundations.
Ever since I first became acquainted with our country's tax law as a college student, I have seen at least 15 so-called reforms take place. There were those who got an advantage and those who did not. But one thing has remained constant over the years - the lobbyists, and the accounting and legal professions have been given another career boost and a long-term financial annuity.
And for the first time in over five decades, I am glad I no longer need to contend with changes in the tax laws. I will focus now on my local real estate taxes where I could have an impact.
Don Keelan writes a bi-weekly column and lives in Arlington.
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