Warning: Take anything that I forecast with a grain of salt. Along with most of the civilized world, I predicted wrongly the outcome of the 2016 presidential election.
Once I overcame the shock of the presidential election results, I began to watch, listen, discuss and read about possible tax changes that could occur. For the first time, I read seriously President-elect Trump’s tax plan. I dusted off my copy of the tax proposals in “A Better Way – Our Vision for a Confident America,” published by House Republicans this summer. Here are a few fearless forecasts and related observations about possible Federal tax law changes.
- 1. Sometime during the next two years – 2017 and 2018, expect the most drastic tax changes since 1986. They may be even more drastic than the 1986 tax reforms. Republicans (at least, in name) control the White House, the Senate and the House of Representatives and will do so at least until 2019. While the Senate majority is not filibuster-proof, Senate Republicans can use the budget reconciliation process to pass tax changes with their 52-48 majority.
- 2. Obamacare is toast. However, there will be some kind of government-sponsored, government-enabled, government-encouraged, and/or government-subsidized health insurance solutions for people that can’t access healthcare through employers or Medicare or Medicaid. You can’t just get rid of entitlements; they are sticky like fly paper.
- 3. Individual and corporate tax rates will be reduced. The tax base will be increased somewhat.
- 4. Related in part to item 3 above, 2016 may be one of the most significant years to follow closely and meaningfully the old tax planning strategy of accelerating deductions (into years with higher rates, it appears) and deferring income (into years with lower tax rates, it appears).
- 5. The alternative minimum tax will go away. Yippee!!
- 6. The Federal estate tax will most likely be repealed. However, there may be some fiscal counter-measures. There could be no step-up (or limited step-up) in basis of property at death. There may be continued gift taxes.
- 7. The specter of massive increases in the Federal budget deficit will temper some of the Trump and Congressional tax cutting proposals. Indeed, fiscally conservative Republicans and Democrats may forge an uncomfortable alliance to rein in the total amount of tax cuts without revenue increases or spending cuts from someplace.
- 8. Both proposals provide for immediate expensing of capital expenditures. The details differ, but not enough to derail the idea.
- 9. There are many other tax law changes in both proposals. Some align, others do no. Many will be enacted.
- 10. While generally pointed in the same direction, the Trump campaign proposals and the House Republican proposals are different in a number of ways. The Trump proposals are very light on details. While “A Better Way” is more comprehensive and cohesive, the authors concede that it is a policy “blueprint.” Many details still must be developed.
Again: I’ve been dead wrong before – recently.
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