Federal Relations

January 11, 2013

Tax Reform in 2013?

Tax reform has been discussed as a probable agenda item for Congress to tackle this year.  But with the recent deal to increase tax rates for higher earners and making certain tax breaks permanent, there now seems to be waning interest in a comprehensive rewrite of our nation’s tax system.  There are several reasons why: the fiscal cliff debate has fostered more distrust between the two parties, politics have become riskier and more complicated, and – most importantly – time is short.  Before any real discussions about tax reform can commence, Congress needs to first deal with the debt ceiling and new deadline for sequestration.  And many republicans are saying that new revenues are “off the table” for those discussions, while democrats are beginning to call for additional revenues as part of any new deal to raise the debt ceiling and get past sequestration.

If tax reform is to be, it will have to happen in 2013 to avoid the politics of an election year in 2014.  And with the debt ceiling, sequestration, and finalizing FY2013 appropriations taking up the first three months of the year it is hard to see how Congress will have the time to take on tax reform.  Add to that the urgent calls for gun legislation and then immigration reform, as promised by President Obama.  Time will tell, but it looks like tax reform may sit on the back burner for the foreseeable future.