The Election, 114th Congress And Fate of Tax Reform

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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? Connect with me on TaxConnections.

Original Post By:  Annette Nellen

Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

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One comment

  1. bubblebustin says:

    Americans are renouncing in record numbers. What are your thoughts on the chances of the US moving to a tax system based on residency? Under review:


    1. Provide an election to citizens who are long-term nonresident citizens to be taxed as nonresident aliens if they meet certain conditions (Schneider, “The End of Taxation Without End: A New Tax Regime for U.S. Expatriates,” 2013; similar to the law in Canada)

    a. Require a minimum period of residence abroad

    b. Impose an exit tax on electing taxpayers where deemed to sell all assets at the time of election

    2. Repeal the foreign-earned income exclusion (H.R.2 (108th Congress), Jobs and Growth Tax Relief and Reconciliation Act of 2003, sponsored by Rep. Thomas)

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