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Will Major Federal Tax Revision Become Centerpiece of Fiscal 2014 Showdown?

September 6th, 2013 | by Morris Beschloss | Comments

 

After an exceptionally quiet interlude dating back to the March 31 sequestration compromise, the U.S. public should brace itself for a “battle royal,” as the new fiscal year emanates with a bang on October 1st. With the Mideast foreign policy fiasco already roiling troubled waters, the six-month continuing “armistice” will come to a crashing halt, as debt ceiling revision, out-of-control deficits, the President’s climate control initiative, and the unacceptable unemployment levels combine with the overseas crises to put the media focus back on the fulminations of a Congress, fresh back from an extended August post-Labor Day vacation.

With the $17 trillion debt ceiling having been breached soon after the Oct. 1 start of the new fiscal year, also lurking in the background are the November 4, 2014 mid-term elections, which will reflect current public opinion, plus laying the groundwork for the 2016 presidential election Super Bowl.

But what may eventually turn out to be the dominant issue of a session transcending Thanksgiving, Christmas, and even the New Year will be a major showdown regarding an obsolete tax structure totally out of sync with undisciplined government expenditures. With the Internal Revenue Service already in disrepute, due to its selective auditing of Conservative tax-exempt organizations, returning lawmakers have gotten earfuls of complaints during their hiatus. These not only focused on the current “patchwork quilt” of lobbyist preferences, but disgust with the fright-inspiring Internal Revenue Service agency, backed by a severe politically partisan Administration.

Although the current IRS approach may not be swept away in the stormy, upcoming Congressional session, the groundwork will have been laid. This procedure will not develop a new tax structure base at this time, but will eventually include the following major points:

1) A thorough review of literally dozens of preferences injected into the IRS codes with increasing intensity by lobbyists over recent decades.

2) A more justifiable, flatter bracket base, where 100% of all income earners participate, even at the lowest end.

3) A review of the Simpson/Bowles Committee recommendations, which suggested a balance between elimination of unnecessary tax preferences with lower overall rates. This presidentially-initiated, but subsequently ignored, bi-partisan group study suggested a clean sweep. It recommended a new start as the only approach that makes sense.

Since such decisions are so heavily politically-laden, this upcoming debate will become increasingly influenced by the upcoming 2014 mid-term elections, and could be dragged out through mid-year. Although a projected outcome estimate of such a major tax upheaval at this time would be foolhardy, it is a sure bet that this issue will not be laid to rest until a foundation for resolution has eventually been laid.

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