[IMGCAP(1)]Although tax reform remains a top priority for the business community, tax executives are not optimistic a bill will reach President Obama’s desk this year.
Their big concern is that the government may seek to enact revenue offsets without adoption of a competitive tax system with competitive tax rates.
The executives shared their views as part of the Ninth Annual Tax Policy Forecast Survey, conducted each year by Miller & Chevalier Chartered and the National Foreign Trade Council.
In last year’s survey, a majority—71 percent—of respondents said that Republican control of both the House of Representatives and the Senate would tip the scales in favor of tax reform in 2015. But while the November elections brought that political change, tax executives now expect the stalemate between Congress and the White House to sink the chances for meaningful tax reform this year and next. While tax-writing committee chairmen Rep. Paul Ryan and Sen. Orrin Hatch have both said they consider tax reform a top priority, the respondents believe the administration will halt any congressional action toward that end.
The survey was conducted in January via email with leading business tax executives, including vice presidents, directors and mangers of tax at a broad cross-section of U.S. and foreign multinational companies. Industries surveyed include manufacturing, oil and gas, insurance, utilities, financial institutions, automotive, health care, defense, hospitality and agriculture, among others.
“There was continuing and increased frustration with where tax reform is,” said Marc Gerson, a Miller & Chevalier member and former majority tax counsel to the Ways and Means Committee. “A lot of that is focused on the Administration. The survey results show an increased level of realization that the Administration has not given significant priority to reform.”
“I think there is a lot of uncertainty about the Administration position because there is no comprehensive proposal,” Gerson added. “There was a framework document and a budget proposal, but it’s hard for taxpayers and trade associations to cobble those together and understand what the Administration plan is.”
The other fear, Gerson noted, is that revenue offsets that were originally meant to be a part of tax reform might become standalone Administration proposals.
“The notion is that the Administration, within the 2012 framework document or the budget proposal, has a significant number of revenue offset proposals,” he said. “Where there are no significant tax reform efforts, there is a concern that the offsets could be used outside tax reform to fund other priorities.”
“I think we will see a large number of targeted’ tax increases included as part of other nontax legislative packages,” said one of the respondents. “I don’t think we will see any reductions in tax. I believe that all U.S. taxpayers will continue to see more of their income paid to federal, state and local governments.”
About half (49 percent) expect things to change after the next presidential election, and are looking for tax reform in 2017 at the earliest, Gerson said.
In lieu of tax reform, businesses are again relying on tax extenders to be kept in place for 2015. Nearly 70 percent of respondents said that extenders are the only “sure thing” in tax legislation that they expect will pass this year.
But there’s no guarantee of what the extenders package will look like, Gerson observed, noting that it is both difficult and risky for businesses to plan investments based on a layering of predictive guesswork—if Congress will act, when it will act and how it will act.
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