There’s good news and bad news to be found in the predictions of the tax business executives polled in the Tax Policy Forecast Survey.
The survey, an annual undertaking by Miller & Chevalier Chartered, found that the feeling among tax executives is that Republicans will control both houses of Congress after the November elections, but the Democrats will keep the White House. It depends on your political point of view, of course, which is the good news and which is the bad.
The survey was completed in late February and early March by leading business tax executives at a broad cross-section of large U.S.-based and foreign-based multinationals and major trade associations.
“We’ve been doing this for a number of years,” said Marc Gerson, a member of Miller & Chevalier and former Majority Tax Counsel to the House Ways and Means Committee. “The results indicate that most tax executives see a very limited tax agenda for the rest of the year, focused on expired or expiring provisions.”
“Expectations for tax legislation are low,” he added. “Respondents saw the pending Presidential and Congressional elections, coupled with the split in Congressional control, as likely putting a significant damper on any proposed tax legislation.”
The focus will be on traditional extenders, such as the R&D credit, the deduction for state taxes, and the AMT patch, Gerson predicted. “And right behind them are the provisions expiring at the end of this year, including the 2001 and 2003 Bush tax cuts. The feeling is that a lot of these will be addressed in a lame duck session after the election. While there may be continuing attempts to pasts the 2011 extenders before the election, it may be delayed until after the election.”
The survey’s Question 8 notes that the reduced individual income tax rates, as well as the reduced capital gains and dividend rates originally enacted as part of the 2001/2003 tax legislation, are scheduled to expire at the end of 2012. It asks, “What will be enacted into law with respect to these reduced rates by the end of 2012?”
“The interesting result is that almost an equal number think there will be no legislation before the end of the year as the number that believe there will be a short-term extension,” said Gerson. “It could be like 2010 where there was a short-term extension, but given the dynamics you could have a situation where everyone relies on getting something done during a lame duck session and nothing comes out of it.”
“How Congress addresses these at the end of the year is sure to impact next year’s tax reform agenda,” he observed.
Naturally, which party controls Congress and who is in the White House will play a role in determining the direction, if any, that tax reform takes.
And here, the results of the survey were enlightening. “It’s pretty clear that the business community favors the policies of Romney in the treatment of business income generally, and in the likelihood of making fundamental tax reform a priority,” he said. “At the same time, the view is that Obama will retain the White House.”
And that’s either bad news or good news, depending on your political worldview.