[IMGCAP(1)]Tax reform is on the horizon, but the horizon likely extends beyond 2016, according to Marc Gerson, tax partner at Miller & Chevalier and former majority tax counsel to the House Ways and Means Committee.
While both the new Speaker of the House, Paul Ryan, R-Wis., and the new chairman of the House Ways and Means Committee, Kevin Brady, R-Texas, have voiced their support for tax reform, 2016 is likely to be another year of discussion and debate rather than serious legislative consideration, given the pending Presidential and Congressional elections, he believes.
“The conventional wisdom is that tax reform will be difficult to move forward in an election year,” he said. “The White House and the Senate are both in play, and a number of Senate Finance Committee members are up for reelection,” he said. “The notion of members taking difficult votes on tax reform faces long odds. Moreover, as evidenced by the State of the Union address, the Administration doesn’t see tax reform as high priority.”
In prior years, tax reform got very cursory mention in the State of the Union address, Gerson noted. “This year there was very little on tax and nothing on tax reform, so the fact that the Administration is not willing to engage in the topic makes the odds even longer for this year,” he said. “But with both Speaker Ryan and Chairman Brady interested in tax reform, we will see some progress made this year.”
Efforts will be made to advance the debate and prepare for potential consideration in 2017, Gerson indicated, so expect to see more hearings and discussion drafts on different issues affecting tax reform.
“Some discussion will come from the new leadership in the Speaker’s office, and the Ways and Means Committee,” he said. “Also, a number of the Presidential candidates are spending more time discussing tax issues. The important thing is that taxes are being discussed and are getting air time. The candidate proposals are not detailed, and some are extreme in different ways. They’re more designed as stump speeches than actual legislation, but they’re being discussed more than in the past. So taxes could be a priority for the next President based on the fact that they’re talking about taxes more.”
Whether tax reform goes forward in 2017 depends on the results of the election, Gerson indicated.
“Depending on who controls the Senate, and who wins the White House, it could be a high-priority issue for the first term of a new President,” he said.
There are different ways to look at the effect of the passage of the extenders bill on tax reform, according to Gerson. “One is that the passage of so many of them on a permanent basis arguably makes tax reform easier because they no longer need to be considered as part of a tax reform package and they don’t have to be ‘paid for,’” he suggested. “This helps tax reform from a revenue baseline perspective.”
“On the other hand, the fact that so many important provisions needed to be passed demonstrated why there’s a need to do reform,” he said. “Now that they have been passed, that’s arguably no longer the case.”