At this point, of course, there are more unknowns than knowns. But a few points seem clear enough that we can begin using some ideas for our planning purposes.
- Republican leaders are planning for federal tax reform plan in early 2017 that requires no Democratic support. That means than no compromises will be necessary to pass the reform law. Republican leaders are also planning the legislative process to be protected from Democratic filibuster efforts to block the legislation. The process in Washington will likely resemble what we saw in the passage of the Affordable Care Act in 2010.
- The key provision of reform is a tax cut for upper income individual and business taxpayers. Until the November election, almost all tax advisers forecast higher tax rates for top-tier taxpayers so this is a game changer with far-reaching effects on the tax planning industry.
- The reform proposal will be designed as “revenue neutral”. That means that tax cuts for the rich will be made up with increased payments from other taxpayer groups. Reforms might be posed to look like a cut for middle income taxpayers but the net effect is planned to be an overall increase in tax revenue from the working class.
- Republicans now realizing that their top priority plan to repeal the Obamacare tax provisions is running into practical problems. At this point, it makes sense to plan for ACA business tax penalty repeal but anything else is still uncertain.
- The new law will bring additional business and opportunities to tax advisers like me. No matter what tax law Congress passes, we benefit every time by helping clients save money through new strategies and then defending clients who get caught by the inevitable snags in the new law. I’ve already published a few tax planning articles and have a few more in progress.