The Future of Tax Reform is a Long and Winding Road
What are some of the things we should be thinking about?
- It will have hills and valleys and undulations and peaks, vistas, views and frustration
- We are a $20-Trillion economy; it’s difficult to model this
- We have obligations that we want to support, but we have to fund them
- We have a lot of demands on infrastructure
- What about civic services and humanities?
This is a topic that’s been top-of-mind for us at Morris+D’Angelo for quite some time now. Here’s what we could reasonably know at this point in the discussion. Remember, beyond the uncertainty around the top individual tax rate, the framework of what we know leaves a number of other key questions unanswered for our customers:
- Your Itemized Deductions are probably going to get limited; this includes Mortgage Interest, State Taxes, Medical Insurance; Bottom-Line, there will be Less Benefit of those things that are traditionally tax-deductible and available.
- There Will Be a Flattening of Rates for the Short Term
Anticipate that it will get more complicated and rates will rise as the economic realities make adjustments necessary due to missed economic targets; shortfalls.
- Your State Tax Obligation will likely rise and have to be adjusted due to Federal inadequacies and lost revenues from the Feds.
- How Will It Be Paid For
If the Government lowers tax rates, we either have to broaden the spectrum of offerings or reduce deductions. The Government still has to raise revenue. So, if we get deductions, we get to raise the rates. The government needs to raise a certain amount of money or it won’t be able to sustain itself.
Bottom-Line: What’s next?
There are no Solutions, Only Trade-Offs
The unveiling of the framework is the first step in a long and arduous legislative process that could take many months.
This process will likely take months and feature many stops, starts and unexpected changes of direction. And there’s no guarantee that Congress will unify around a single plan. The party has spent many months trying unsuccessfully to pass health care reform legislation. Tax reform is at least as complex as health care.
Still Remains to Be Answered
“If We Want This, This and That, How are we going to pay for it?”
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