It goes without saying that the federal congress is incredibly divided. In this day and age, compromises are difficult to come by. However, one lawmaker pointed to the possibility of a major tax law reform that could receive bipartisan support.
Of course, this blog isn’t designed to provide political commentary. This post simple serves to inform readers about a potential, significant change to U.S. tax policy that could impact tax compliance and disputes.
Senator Ron Wyden, who is the leader of the Senate Finance Committee, says that 2015 could serve as a good time to lower the overall corporate tax rate while simultaneously closing loopholes.
Right now, the baseline corporate tax rate is 35 percent. Many in the business community have urged federal officials to lighten that burden. Some businesses have turned to alternative tax strategies, such as having operations overseas in better tax climates.
Wyden’s proposal would reduce the overall rate to 24 percent. Any shortfalls would be covered by closures of long-standing loopholes. In other words, lawmakers in both parties would get what they want.
The idea is that a lower corporate tax rate would increase compliance and prevent companies from turning to strategies that fall into a legal gray area. Many companies have drawn scrutiny for tax avoidance strategies. Hopefully reform would bring some harmony between business and the Internal Revenue Service.
Until changes are made, businesses are going to have to continue to defend against claims of “creative accounting.” Through all of this, many businesses are simply working within the bounds of a very complex system of tax laws.
Source: Reuters, “Window envisioned for overhaul of federal tax code,” June 17, 2014