Tax Reform – Why We’ve Been Nearly Silent

Posted on Thu, Nov 16, 2017 ©2021 Drucker & Scaccetti

Irina Eric.jpgBy: Eric R. Elmore and Jane Scaccetti, CPA, MT, PFS

 

There is no shortage of articles, opinions and talking heads about The Tax Cuts and Jobs Act.  Does it help the middle class, or hurt the middle class?  Is it good for the wealthy or does it not impact them much? Is it a job creator or a job killer? And, we can go on and on. Meanwhile, The Tax Warriors® at Drucker & Scaccetti have been relatively silent about the bill.  It’s time our subscribers understand why.

 

Taxes are personal. The particular facts of your situation will dictate how the law impacts you today vs. last year vs. next year. It is a frustrating situation when, as tax professionals, we must ‘run the numbers’ or ‘look up the law’ to apply your facts and not know an answer ‘off the top of our head.’ Taxes are complicated. Our goal is thoughtful informed application that enhances the opportunity to legally pay less without undue risk. Therefore, we apply your facts to the law. And that gets to the second issue: what is the law likely to be?

 

Brokerage firm E.F. Hutton became a household name in the 80s for its memorable commercials that ended with the phrase, “when E.F. Hutton talks, people listen.” We recognize the power of professional opinion. Tax reform now is a bouncing ball. Over the last week, with the Senate version released, we have a little more clarity. But, we have been in the tax game for decades and we remember the last time this level of tax reform was proposed.  And, though the players were different, the legislative process is not.

 

Much like President Trump, Reagan sought to change the tax code as we know it. However, Congress was led by the Democrats, who were (and still are) no fans of Reagan’s supply-side economics.  Long story short, Reagan’s landmark tax reform took two bills and five years to pass; one bill in 1981 and the next in 1986 (the 1986 bill was actually co-sponsored by two Democrats). The reform changed often in both Houses of Congress and ultimately forged a great working and personal friendship between Republican President Reagan and Democratic Speaker of the House Tip O’Neill. 

 

The end product of tax reform may take a while and may look different than it does today. President Trump does not have a good working relationship with Congressional leadership on either side of the aisle. This is yet another hurdle that could impede the speedy “by Christmas” signing of the bill the President has predicted. Or, as we say in Philadelphia, it could pass “wit or witout” certain provisions.

 

The Tax Warriors were there in the 1980s.  We understand reforms can take time…a lot of time. This bill can still largely be effective January 1, 2018, but not pass until after midterm elections. But the last time that happened, the government was facing huge surpluses, and even then it was very complicated.   

 

There are opportunities for clients to plan now.  There are areas of potential savings in state and local taxation (SALT) that should be reviewed and considered, as well as business considerations around buying or leasing equipment. The tax reform bill is not a stop sign for tax planning; it is a yield sign—proceed with caution- conditions may change suddenly!

 

The Tax Warriors are almost giddy with the excitement of seeing tax reform happen. We have spliced up the details and have expert teams tracking the law, commentary and debate on specific issues. Whether in the halls of Congress, the White House or at the company water cooler, everyone will have an opinion.  We want to have an informed opinion!

 

If you have specific questions about provisions in either tax bill, contact us. We are happy to discuss your specific situation as it relates to the proposed changes. As Congress negotiates over the next few weeks, common ground will crystalize. We are planning a client-wide conference call sometime after Thanksgiving to offer a verbal update on what we are seeing.  Until then, we will continue to monitor the proposed reforms and work with our clients likely affected. Call us if you have specific concerns or wish to talk about your facts and the impact proposed law changes can have on your business and family.

Topics: Middle class, Patient Protection and Affordable Care Act, Paul Ryan, Tax reform, Obamacare, Trump, House, Senate, H.R. 1, Opinion, Reagan, Supply-side economics, 1986, Tax Bill, Mitch McConnell, Tax cuts, Overhaul, 1981, Tax Cuts and Jobs Act

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