Panel
U.S. Tax Reform: What's New, What Would It Mean?
- Experts anticipate the relationship between tax policy and job creation to remain tenuous, with incentives for R&D potentially encouraging offshore investment over domestic growth rather than fostering new employment.
- Current tax structures are predicted to create inefficiencies and waste, with specific provisions like carried interest and mortgage interest deductions on second homes expected to face elimination due to complexity or lack of clear economic justification.
- Small businesses are identified as facing limitations from the Alternative Minimum Tax and a lack of awareness regarding existing incentives, though proposed legislation may offer targeted relief for R&D spending by startups.
- Tax reform efforts are forecast to require a longer horizon to achieve consensus on growth, simplicity, and fairness, with a specific recommendation for a 10-year sunset clause to align with the federal budget window.
- Revenue projections suggest that eliminating tax deferral for foreign earnings could generate hundreds of billions in revenue over a 10-year period, while repealing municipal bond tax exemptions risks reducing public infrastructure funding or shifting the burden to more regressive state taxes.
- Concerns regarding IRS underfunding highlight a widening tax gap of over $300 billion, with predictions that increased funding would yield a significant return on investment and prevent longer refund timelines.
- Without substantial presidential leadership, comprehensive tax reform involving entitlements and revenue changes is expected to stall in the current political climate, particularly during a second term.
- Future tax codes are likely to move toward greater permanency to build business and investment confidence, potentially starting with a cap on deductions at 28%.
- Economic forecasts predict that estate tax exemptions from the 2012 fiscal cliff deal are too regressive and may negatively impact family farms, while identity theft poses a growing threat to the tax system if left unaddressed.
- The IRS anticipates a difficult operational environment due to the implementation of the health care bill, and a repeal of the municipal bond tax exemption may force the market to demand higher risk premiums or price adjustments.
- IRA caps are expected to remain ineffective for the top 0.3 percent of accumulators, who are predicted to continue saving regardless of changes to exemption levels.
- Repatriation provisions without strong enforcement mechanisms are expected to face lobbying opposition, as previous instances resulted in layoffs, share buybacks, and dividends rather than new business investment.