Friday, September 22, 2017

Real tax reform it'll not be

Fall has arrived and this means it’s time for another round of federal tax legislation.  This time, our political leaders in Washington tell us it’ll be a tax reform one.

Some of us will don blinders and earplugs sparing us of all the tax reform facts, figures and rhetoric coming from our favorite media sources. 

Tax reform is a nice soundbite offering a perceived something for everyone.  For those at the bottom of the economic totem pole, hopefully, it’ll tax rich folks and corporations not paying their fair share.

For those at the top, maybe it’ll correct a perceived flaw of using our tax system for other than assessing a tax on income earned.  Like, for example, giving earned income and other welfare-like tax credits putting taxpayer monies in the hands of those who’ve not earned it.

Our political leaders like giving us tax reform and tax relief and they do it often.  In the last 60 years, we’ve had at least 20 rounds of federal tax legislation promising more tax reform and relief.  Three times, what was enacted can best be described as tax reform.

In 1954, we had the enormous and reform-minded 875-page Internal Revenue Code of 1954.  It was the first comprehensive revision of our federal income tax system since its origin over 40 years earlier in 1913.  This first round of tax reform legislation, considered by some to be the most monumental overhaul of our federal tax system because it changed over 3,000 tax laws.    

Fifteen years later was a second round of tax reform, the Tax Reform Act of 1969.  It made major changes to the 1954 tax laws. 

Seventeen years later, we had President Reagan’s Tax Reform Act of 1986.  Some commentators described it as the most complex tax reform ever because it required over 180 follow-up technical corrections.

Since then, 31 years later, we’ve had another 17 rounds of federal tax legislation giving us more tax relief but none having the “reform” word in their titles.  This means we’ve not had any tax reform for over three decades because legislation can’t be tax reform unless it has the reform word in its title, right?

History tells us we need tax reform legislation every so often to fix abuses created from previous tax relief legislation.  Politically, for best results, it’s something meant to be rinsed, washed and repeated. 

Last year when campaigning for President, we learned of then candidate Donald Trump’s tax law proposals, theme-based tax reforms that supposedly would make America great again.  Who wouldn’t want this?  Not me, and probably not you.

As Congress now prepares for 2017 tax reform legislation, the devil will be in the details advocated by a brigade of special interests, all hoping to benefit from federal tax reform legislation.  One thing is certain, it takes more than the “reform” word in the title of federal tax reform legislation to deliver meaningful and real tax reform. 

President Trump learned a valuable lesson earlier this year from the failed attempt to repeal and replace the Affordable Care Act, so he’s now courting Democratic support that’ll be necessary for bipartisan tax reform.  Meanwhile, Congressional Democrats have stipulated certain prerequisites needed for bipartisan tax reform.  Great odds exist even though their dating has just begun. 

A pig wearing lipstick is still a pig.  Reforming abusive and complex tax laws takes more than legislation having the reform word in its title. 

What’ll it be, this upcoming federal tax reform our political leaders will give us?

More pages to the about 3,000-page Internal Revenue Code with new complicated laws ridden with loopholes providing tax relief to some but, real tax reform it’ll not be. 

Pax Domini sit semper vobiscum

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