When Democrat senator Max Baucus unveiled a raft of tax reform proposals on a number of issues important to high net worth families in late November last year, some Capitol Hill pundits thought there may yet be hope for some restructuring of America’s unwieldy tax regime. But Baucus’s recent nomination as the new ambassador to China seems to have torpedoed that idea.
Yet this year, another Democrat seems to be filling the tax reform vacuum left by Baucus. The new Senate Finance Chair, Ron Wyden, is looking to rewrite the “dysfunctional, rotting mess of a carcass that we call the tax code”. Many of his ideas are rehashed from a previous bill he tried to pass in 2010; in essence, Wyden wants to create three individual income tax rates (15%, 25%, 35%), dramatically increase the standarddeduction, repeal the Alternative Minimum Tax, and transform the preferential capital gains rate into a tax exclusion.
But like Baucus, or any other would-be tax reformer, Wyden has his work cut out for him attempting to get his voice heard above the ever-increasing swell of election-year hubbub on The Hill.
Commenting on the potential for any tax reform in 2014, one third-generation family business patriarch said that while some family members might believe “the more complex the tax code, the more opportunity for loopholes,” family businesses are, in fact, among the biggest proponents for a simplified tax code – for both businesses and individuals – an idea with broad support from Republicans and Democrats alike.
But the truth is that political brinkmanship and stalemating is likely to hold back any tax reform until after the November 2014 midterm elections, even though some leaders on both sides of the aisle would like to see action sooner.
Also pushing a major tax reform bill is the Ways and Means Committee chairman, Republican Dave Camp. But any markup forCamp’s proposals, released late February, might not happen for months, if it happens at all. And after a year when the Democratic-majority senate took the nuclear option, eliminating filibusters on most presidential nominees, manyRepublicans have subsequently come to believe their tax reform policies would not be something the president would accept.
One Washington insider thinks neither Camp’s nor Wyden’s plans will have any momentum whatsoever, both because of time reasons – there’s less than a year left until the midterm elections – but far more importantly, because neither have their caucus on board.
As for Camp, his proposal is for comprehensive tax reform as part of an economic growth plan – and anyRepublican growth plan would be almost impossible for Democrats to stomach.
So while these current tax reform bills might cause a stir in corporate America, it’s extremely unlikely that tax reform that affects family business will happen before this year’s midterms. The only people who apparently still think otherwise are Camp and Wyden.