With congressional elections coming in November, ongoing controversy over the Affordable Care Act, and policy exhaustion on the part of both Congress and the White House, don’t expect dramatic changes in tax policy in 2014. But there will still be some important issues on the table—not all of them in Washington. Here are five trends to watch in the new year:
The Tax Extenders: More than four dozen tax provisions expired at midnight on Tuesday, though they can be restored retroactively. It isn’t unusual for Congress to miss the deadline to continue these provisions, but the challenge in 2014 will be finding a must-pass legislative vehicle on which an extension can ride. My best guess is they will be restored fairly quickly and with little discussion—perhaps as part of a January government-wide spending bill or combined with an extension of long-term unemployment benefits. If lawmakers miss that opportunity, the expiring tax breaks may not be addressed until very late in the year—perhaps after the November, 2014 elections. Then, there is the matter of whether Congress will pay for them….
Tax Avoidance by Multinationals. In 2013, the European Union, the OECD, and the G-20 all took steps that could lead to a crackdown on tax avoidance by multinationals. Whether these efforts result in real action or more bureaucratic paper shuffling remains to be seen, but pressure appears to be growing to halt practices that result in firms paying no tax to any jurisdiction in which they do business.
Internet Sales Taxes: 2014 may be the year Congress finally addresses this issue. The U.S. Supreme Court’s December decision that let stand a New York law requiring online retailers to collect sales taxes collect has flipped the politics on its head. Based on that ruling, states now have broad authority to require collections. It would be helpful for Congress to create a roadmap for state laws requiring sellers to collect the levies.
Federal Tax Reform: It won’t happen in 2014. The question is: Will lawmakers be able to build on the draft reform proposals issued by Senate Finance Committee Chair Max Baucus (D-MT), who will resign once he is confirmed as ambassador to China, and House Ways & Means Committee Chair Dave Camp (R-MI), whose term as chair will end in January, 2015? The fate of reform may depend, in part, on the priorities of the incoming chair of the Finance panel, Ron Wyden (D-OR), who in the past has proposed far-reaching reforms of both tax and health policy--both in the committee’s jurisdiction.
State Tax Reform: While it isn’t likely much progress will be made on federal tax reform, keep an eye on state tax overhaul commissions, as well as on efforts by many jurisdictions to find new revenues through fees, increased casino gambling, and other non-tax sources. Some states to watch: Texas, South Carolina and Wisconsin. In addition, Oklahoma will try again to enact tax cuts that were rejected by state courts and Illinois needs to decide what to do with a package of temporary taxes that are due to expire.
2014 won’t be a year of cosmic change in the tax law, but it will be worth watching.
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