White Smoke for Tax Reform?
During the second week of March, a number of monumental events took place in Washington, D.C. While the entire world watched as white smoke appeared out of the Vatican, the President was in the U.S. Capitol visiting with House Republicans for the first time in two years. It was in this same week that Senate Democrats and House Republicans released their budget road maps, and not to be outdone, the House Ways and Means Committee released a substantial discussion draft for small business tax reform.
For the past five years, we have heard about how Senate Democrats have annually failed to produce a budget, and since it was first introduced three years ago, House Republicans have been repeatedly blasted for “ending Medicare as we know it.” In one of the greatest ironies, a document that has neither the force of law nor requires the President’s signature, also is often the leading piece of campaign fodder used each year.
Neither appears passable on their own, but passing their respective bodies and getting to a conference could be the next step for the two sides to negotiate an agreement. While these do not result in changes in law, they do have the power to instruct committees, such as the tax-writing committees as they tackle tax-reform and can be passed with 51 votes.
This leads us to the big question of whether or not tax reform can be accomplished. As we've long said, to get to lower rates and broaden the base, credits and deductions could be eliminated, concerning those of us fighting for S Corps. The Democrats have publically stated they want a carbon tax and value-added tax, and are reticent to reform entitlements. As a result of the fiscal cliff negotiations, taxes were raised on the highest earner to the tune of $600 billion. So ask yourself this: If you are a Republican primary voter and your representative already voted for one tax increase, do you think they will vote for one a second time?
March 13 may have been the last time we see white smoke in a long while.