Tax Policy – Lawmakers Start the New Year with a Long Tax Policy To-Do List
The close of calendar year 2018 left several items on lawmakers’ tax policy to-do list. In December, outgoing Ways and Means Chairman Kevin Brady (R-TX) led several iterations of a year-end tax bill to address tax extenders, technical corrections to the Tax Cuts and Jobs Act (TCJA), and other policy changes, but no bill was signed into law. Furthermore, funding for several departments and agencies, including the Internal Revenue Service (IRS), has lapsed.
For many businesses and individuals, no action on tax extenders—a collection of more than 20 narrowly targeted provisions that expired at the end of 2017—means a high amount of uncertainty for what their 2018 tax bill will look like. Recall that last year, Congress didn’t deal with extenders until February 2018, when they retroactively extended the collection of expired tax breaks for the 2017 tax year. This isn’t an efficient way to legislate. Retroactive tax policy makes it difficult for businesses and individuals to plan, and it doesn’t boost long run economic growth; people can’t go back in time to change their investment decisions. Congress ought to decide which policies deserve permanence, and which should remain expired for good.
Also left unaddressed are technical corrections to the 2017 tax law. On January 2 of this year, Brady released a 91-page Tax Technical and Clerical Corrections Act discussion draft, which included more than thirty technical corrections to the TCJA. The proposal would have fixed the well-known “retail glitch,” which mistakenly excludes a category of business investment from 100 percent bonus depreciation. That error created an investment barrier to retailers, grocers, and other types of businesses. The bill would also have clarified an issue with the tax treatment of net operating losses.
Another question facing lawmakers in the new year is government funding. The IRS is one of the agencies closed due to the partial government shutdown. House lawmakers are scheduled to vote on IRS funding this Wednesday, but it’s doubtful that the Senate will take up the bill. However, on Monday, officials clarified that the tax filing season would begin on January 28, and that refunds would be paid, meaning that many IRS employees would return to work without pay during the shutdown.
With so many issues to address, hopefully Congress can act sooner rather than later to give taxpayers the certainty and the clarity they need.
Source: Tax Policy – Lawmakers Start the New Year with a Long Tax Policy To-Do List