As the year draws to an end, there is always a furor about taxes. Whether a new tax law will emerge or just a new suit of clothing for the old law, there is always the same question to be answered. How does it affect me? That is always the discussion. Now there are ongoing discussions, planning meetings, House format, Senate format—but why? It is not necessary to rewrite the basic tax law to accomplish the desired end product. If the President wants new lower rates and individual savings, just reduce the percentage of tax at each level of income and leave the corpus alone. If he wants to reduce the corporate tax rate, just lower the rate from 35% to 20% or 25%. It is not necessary to rewrite the master plan. And, why are there so many non-professional contributors involved in the tax discussion? I think it would be much better to employ a battery of tax professionals, commonly referred to as Certified Public Account- ants and Tax Lawyers, to consider the cause and effect of any change in the tax law. Just because someone is in the House or Senate is not a good reason to allow the members to wrestle the tax law into a more complex animal. Most commentary regarding the new law is not favorable. The corporate law is more acceptable to most, but the individual tax law is riddled with verbiage that is not helpful to anyone. The most recent compilation of information provided by the committee was in excess of 400 pages. Really! Why?
The current law allows exemptions and deductions and tax rates that seem to be acceptable to most. Now consider: If your total tax bill, before deducting pre-payments, properly paid during the tax year, was $15,000, and your tax rate was 20%, your tax bill would have been $3,000. If the new tax law simply changes the rate to 15% and allows all other tax-related deductions to remain unchanged, your tax bill, under the “new” law would be $2,250. You just received a $750 increase to your spendable cash flow. All other things being equal, that would produce the outcome that is being debated and would be easily applied by all. Why reinvent the wheel? I am amazed that no one in Washington has thought of this—well, maybe not so amazed. Actually, Chris Christie, the Republican governor of New Jersey, has proposed a reduction in federal income tax brackets from six to three with a top tax rate of 28 percent, more than 10 percentage points below the current top rate of 39.6%.
The bottom rate would be an unspecified single digit rate. That is admirable, but he would pay for the individual tax cuts through cutbacks and eliminations of various tax deductions and credits. He had it half right. I do not see the need for changing anything else about the code other than the tax rate. Why cut off your arm if your finger is infected?
Tell your representatives to stop wasting time and money and just take the most logical and defensible route. Stop the bickering and the governmental deadlock. The subject of taxation should NEVER be a political football. Just get it done!
The views expressed in this article are those of Jim C. Wilson and may not necessarily be those of the GCA News and its personnel—but it should be the view of everyone.
For more information, call Wilson & Wilson, PC, CPA, CFE at 615-673-1330 or email jim@ wilsonandwilsoncpa.com