The tax code is, in a word, complex. It is thousands of pages long, with millions of different entries representing credits, deductions, exemptions, reporting mandates, caveats, loopholes and more. Legislators across the political aisle all agree that significant tax reform is desperately needed by Americans of all economic strata, but concede that it no prospects are currently forthcoming to make viable changes.
While there are no significant tax reform proposals from either party currently up for debate in Congress, leading Democrats are indicating that they’d only support reform under certain circumstances, including:
- Be revenue-neutral (meaning that it won’t add to the current national deficit)
- Include no tax cuts for the wealthiest Americans
- Is only handled through the regular legislative process (not the so-called “fast-track” notoriously invoked to avoid filibuster)
Why reform is necessary
Experts of all political affiliation agree that are tax code is both needlessly complicated and antiquated. The last significant, sweeping tax reform came back in the late 1980s, and it is well past time for evolution of the code.
- An unduly onerous tax code inhibits economic growth in that it forces businesses and families alike to focus on the tax consequences of particular actions instead of the overall benefit in terms of financial return. This is a slippery slope that has a “chilling effect” on the country’s overall economy.
- Reform is also needed because it perpetuates the vast divide between the so-called “1 percent” compared to the lower economic strata: simply put, rich people can, with teams of tax experts at their side, dig deep in the code to find loopholes and credits that less affluent individuals could never imagine existed. Such unfairness, though technically legal, often results in extremely wealthy people paying a much lower tax rate than their less financially stable counterparts.
For now, tax reform is just an aspiration. There haven’t been any announced bills regarding tax simplification recently. Even if proposals were actually on the table, our federal legislators are finding it difficult to agree on much of anything these days anyway, so there’s certainly no guarantee that a measure would pass.
In the meantime, the complex, unwieldy tax code we have can make tax compliance difficult without due diligence and care. When you – as an individual taxpayer or as a representative of a business interest – are facing tax difficulties from state or federal taxing authorities (including audits, collection actions or allegations of criminal activity), consult an experienced and skilled tax attorney for guidance and representation.