Tax reform in 2017-2018 is focused on reducing taxes for affluent individuals and large corporations. Dramatic cuts are proposed by the President and some Republican members of Congress. It could be a game-changer for tax planners like me who use these tax laws to find ways for clients to pay less. Yet the public overwhelmingly thinks that large corporations and affluent individuals do not pay enough taxes now. That means that Congress’ efforts to cut the top corporate and individual tax rates will face public resistance.
We know that one-party initiatives (particularly the Republican goals of tax cuts for the wealthy) depend partly on the national mood and the political makeup of Congress. In contrast, bipartisan reform can happen anytime. At this point there appears to be little chance of bipartisan effort and even the Republican party is far away from agreeing on any specific set of tax reform proposals. Assuming that the best chance of tax reform is through a Republican-only legislation, then they must do so while both houses of Congress are under Republican control.
Fivethirtyeight’s forecast says “Democrats are in the best position they’ve been in since 2010 to win a majority of seats in the House of Representatives. The Senate map, on the other hand, is so tilted toward the GOP that most political analysts have all but dismissed Democrats’ chances of winning the chamber before 2020.” It appears that the window for passage of the Republicans’ one-party legislation is a little more than a year.
It takes time to implement major tax policy reform. Assuming that Republicans pass legislation before the 2018 elections, what are the chances that these changes can be fully implemented before we have a major shift in policy that may undo them again?
I predict that we will see tax reform by 2018 but it won’t be nearly as bold as as what is publicly discussed.