Tax Reform: The great debate
October 17, 2017 |
Will Congress pass a tax reform package? What will it mean for you in Minnesota?
Two very good questions. Two questions I, unfortunately, can’t answer today.
What I can tell you is the looming possibility of tax reform is creating a high degree of uncertainty and significant risk potential in Minnesota. State leaders are finding it more difficult to model future revenues and expenditures to determine resource allocations.
When I’ve asked members what tax reform means to them, I’ve heard a wide variety of answers -- each as different and unique as snowflakes in a December blizzard. But, regardless of the answer, a few common themes emerge:
- More certainty for planning purposes
- Less complexity to ease the burden of compliance
- More efficiency in the tax code to spur economic growth
As you listen to various reports about tax reform, keep one thing in mind: Much of what you hear in the early conversations is purely aspirational. Every lawmaker has their own ideas of what reform will look like. There will be ideas that could result in significant positive reform, and there will be other ideas intended to simply make a political statement. Not all ideas will be good ideas, and few will have enough broad-based support to pass. After all, tax reform that would result in significant change is often, by design, very difficult to pass.
It has been a generation since the 1981 and 1986 tax reform packages were enacted. Since then, the world has changed significantly. Our global economy is beyond what we could have envisioned, and yet we continue to apply tax law from 30 years ago. Think about it -- would you still use a computer from 30 years ago to do business today? Government regulation could help foster greater economic growth if policies kept up with current realities.
Not only was the economy in the 1980s very different than today, but politics were also very different. The 1986 tax reform changes took almost three years to pass, and were led by a republican president and democratic Congressional leaders. They were forced to work together and reach compromise. Can compromise happen in today’s political world? That remains to be seen. Compromise will be necessary to achieve meaningful tax reform that does more than make a political statement.
What does all this mean for CPAs? It means there will be changes that affect you personally, but also changes that affect your business or clients (members can read my October issue of Legislative Digest for more on this topic). This is also a great opportunity to educate lawmakers, provide real examples from your experience and enhance your reputation as a trusted adviser.
I'm sure you have your own thoughts about tax reform. As a CPA, who better than you to help elected officials understand proposed tax law changes and make informed decisions. Be sure to share your thoughts with your elected leaders. Don’t sit back and hope someone else will suggest your great ideas!
Topics: Legislative & Government Affairs, Taxation-Individual, Taxation-Business
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