The outcome of next week’s election is likely to determine tax policy, but some elements may be outside the control of whoever gets elected to the White House and Congress.
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A pair of tax policy experts tried to predict the post-election outcome during a panel discussion Monday at Accounting Today’s Growth & Profitability Summit. Brett Ferguson, a senior congressional reporter at Bloomberg BNA, said he believes it is unlikely that Republicans will lose control of the House, but the Senate is a complete toss-up.
“It doesn’t matter what happens in the Senate now,” he said. “You need to have 60 votes for anyone to have power there.”
Ferguson noted that while voters generally know what President Obama wants to do with the Tax Code, they know “a little bit less” about which deductions Republican challenger Mitt Romney would eliminate. If Romney is elected, he is certain to push his tax policy goals, but it is not likely that Democrats in the Senate would simply cave in.
CCH principal tax analyst Mark Luscombe discussed the state of the tax extenders legislation. The Senate Finance Committee managed to pass a bipartisan tax extenders bill in early August extending dozens of expiring and already expired tax provisions (see Senate Panel Passes Bipartisan Tax Extenders Bill). The bill leaves out a number of provisions, such as some energy industry tax breaks, but it is not clear that the House is willing to go along with the Senate version.
“The IRS is still trying to decide what to do,” he said. “The congressional committees aren’t sure what to tell the IRS about the extenders.”
Some tax breaks that initially had been pared out of the tax extenders bill, such as a tax break for motor sports entertainment sites like those used for NASCAR races. “They tried to get rid of them, but wound up under pressure having to put them back in,” said Ferguson.
Luscombe is skeptical that either an Obama or Romney administration would be able to accomplish comprehensive tax reform like the kind that happened with the Tax Reform Act of 1986. “The majority of experts don’t believe the atmosphere is there to advance fundamental tax reform,” he said. “In 1986, it was a different atmosphere. It’s too polarized now. You need to have the right atmosphere.”
It is difficult how to advise clients in areas such as estate planning with the estate tax set to return to its old levels from before the Bush tax cuts. “Should we be talking to clients about doing major gifts this year?” said Luscombe. “But people are worried about clawbacks by the IRS.” He doubts the IRS would do a clawback once there is more certainty in the law, but there is no certainty right now what the tax laws will be next year.