Tax Division testifies on miscellaneous revenue proposals.

• Author: Karl, Edward S.
• Position: American Institute of Certified Public Accountants Tax Division

On Sept. 21, 1993, Pamela J. Pecarich, chairman of the AICPA Tax Division's Tax Legislative Liaison Committee, testified before the House Ways and Means Subcommittee on Select Revenue Measures public hearing on miscellaneous revenue measures.

The subcommittee held a series of hearings during the month of September on approximately 75 revenue-raising provisions that various members of Congress were considering using as revenue sources for future tax changes. The list of provisions was circulated to Tax Division technical committees for review. That testimony represented their feedback, as well as the thoughts of the Tax Legislative Liaison Committee and the Tax Executive Committee.

The Institute believes many of the items on the list submitted for this series of hearings should be rejected without substantial discussion. For some years, the AICPA has expressed its concern that tax legislation is being driven significantly more by revenue needs than by tax policy considerations. There are any number of proposed tax changes on the Select Revenue Measures Subcommittee's agenda that seem to fit this description, and in most instances the revenue increase from a particular proposal is not all that large. However, the Institute is concerned that it has had great difficulty (or no luck at all) in even determining the proponents of specific proposals, much less the policy rationale behind most of them. What is left, then, is a perception that many of these items are being suggested to raise revenues, the use of which will be made known at a later point.

A number of the proposals take provisions that were debated, negotiated and ultimately passed in the Revenue Reconciliation Act of 1993 (RRA), and move them one or two steps further. This back door approach for getting still more revenue from provisions that took seven months to originally craft is singularly inappropriate. For example, the badly needed simplification of the individual estimated tax system (included as part of the RRA) provides that individual taxpayers with adjusted gross incomes (AGIs) exceeding $150,000 will have to use 110% of last year's tax as a safe harbor for paying current year estimated taxes, rather than the 100% used by all other individuals. That change was the result of substantial discussion and negotiation, and resulted in what was seen as a "fair" solution to a problem that had been caused by a short-term need to raise a certain amount of revenue back in 1991. The process of correcting the difficulties caused by that casual 1991 change (made without benefit of...