The election results, while no surprise, have pretty much left us where we were in terms of tax policy, according to Roger Harris, president of Padgett Business Services.
Much needs to be done before the end of the year and the same people are in charge, he indicated. The only positive is that we are as far away from the next election as we will ever be. The results do seem to make it more likely that tax rates will be raised on high-income taxpayers, though the House Republicans have promised they will not allow that to happen. But something must be done, or taxes will go up on everybody and nobody wants that to happen.
If there is an attempt to find a long-term bipartisan solution to our tax mess, some type of tax reform may provide that opportunity, particularly if it is combined with a serious attempt to reduce the deficit, Harris said. Tax reform can provide the revenue the Democrats insist on and give cover to the Republicans that refuse to raise rates. But this too will take leadership from somebody.
And the good news is that if all else fails, we are only two years away from the next election, he added.
Dean Zerbe, national managing director of the tax credit consulting service alliantgroup, and a former senior counsel and tax counsel for the Senate Finance Committee, sees the possibility of a deal taking shape in Congress after comments by Speaker of the House John Boehner, R-Ohio, on Wednesday indicating that he was willing to work on a tax reform deal with Democrats in Congress and the Obama administration to avert the fiscal cliff.
"There is an alternative to going over the fiscal cliff, in whole or in part, said Boehner. It involves making real changes to the financial structure of entitlement programs, and reforming our Tax Code to curb special-interest loopholes and deductions. By working together and creating a fairer, simpler, cleaner Tax Code, we can give our country a stronger, healthier economy. A stronger economy means more revenue, which is what the president seeks. Theres a model for tax reform that supports economic growth. It happened in 1986, with a Democratic House run by Tip ONeill, and a Republican president named Ronald Reagan.
Washington is still clearing its head from the election night, but the comments by Speaker Boehner against any increase in tax rates suggests both a hard road ahead and a path to a deal, said Zerbe.
While the Republicans will continue to fight rate increases, it may be a signal of a willingness to limit deductions for wealthy individualsas was proposed by Governor Romney in his campaign and put forward by the Republicans in the Super Committee deliberations. It would be helpful to the economy and jobs if Washington could make a decision now on taxes and have it be permanent.