Tax Regime Uncertainty

Date01 May 2017
Published date01 May 2017
© 2017 Wiley Periodicals, Inc.
Published online in Wiley Online Library (
DOI 10.1002/jcaf.22270
Tax Regime Uncertainty
Caroline D. Strobel
I had hoped to be writing a
column on proposed tax legis-
lation in the United States, but
this seems to have been pushed
back in favor of other legisla-
tion, particularly the repeal of
the Affordable Care Act. I will
comment on what seems to be
the general consensus around
future tax legislation. On the
corporate side, it appears that
corporate rates will be lowered
to a top rate of 20%, down
from nearly 40%. This will
allow us to be competitive from
a tax standpoint with Euro-
pean countries. Taxes are a
major expense that is incurred
by businesses for the privilege
of doing business. To address
the problem around profits
that have not yet been repa-
triated back into the United
States, there will be a lower
rate for profits brought back
from abroad provided they
are spent to increase corpo-
rate investment on plant and
new employees in the United
States. Another welcome move
apparently will be the imme-
diate write-off of currently
depreciable property. These
moves should provide a power-
ful incentive for investment in
the United States. There is also
strong support for making our
tax system water-edge, which is
what is done in the rest of the
industrialized world. This will
eliminate the reluctance to keep
profits overseas to prevent the
imposition of additional taxes
because of our currently higher
tax rates.
On the individual tax
side, there is a lot less clarity,
primarily because of the com-
plexity surrounding individual
taxes. Special interests will
be at work trying to prevent
the repeal of many provisions
that promote certain activities
in order to entice taxpayers
into taking certain actions in
order to reduce taxes. What is
talked about is a change in the
law so that small businesses,
partnerships, and S corpora-
tions (flow-through entities)
will be taxed at the same rate
as corporations. This is really
important from the standpoint
of small businesses, which are
a major source of new employ-
ment. Another welcome move
would be the elimination of
itemized deductions (mortgage
interest and charitable contri-
butions would be retained) and
many of the personal credits
in favor of a larger standard
deduction so that low-income
taxpayers would have a much
simpler taxreturn to file. Some
suggest that it would fit on a
postcard. I am not holding my
breath over this suggestion.
There would be a graduated
tax rateof three levels: 15, 25,
and 33 percent. There is again
an effort on the part of Repub-
licans to totally eliminate the
estate tax, which affects only
the wealthiest Americans.
Whether the entire tax
package would go through as
one bill or two separate bills is
unclear. There is further uncer-
tainty as I write this column
about the timing, whether it
would occur this year or next.
What is clear is that this along
with the repeal of the Afford-
able Care Act in favor of a
more sensible health care sys-
tem are the two major changes
needed to increase economic
activity in the United States.
The Treasury Inspector
General has found that the
failure of the IRS to enforce
backup withholding provisions
is causing the federal govern-
ment billions of dollars in lost
revenue. Amounts reported
on information returns by
payers that do not have iden-
tifying numbers (TINs), or

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT