Posted by: Heinz Brisske
With the onset of a new year, optimism for tax reform again blossoms in Washington. The Senate Finance Committee and the House Ways and Means Committee will again embark on a journey toward major tax reform. But is there realistic potential for such reform in an election year?
When it comes to personal and estate taxes, there is general agreement that the tax code should be broadened by reducing deductions and tax rates. The obvious political challenge for lowering rates is that state and local tax deductions would have to be eliminated and there must be substantial limits on deductions for mortgage interest. Elimination or reduction in these deductions will be politically challenging.
At this time, there is a relatively low level of interest in modification of the estate and gift taxes. The applicable exclusion amount of $5.45 million for 2016 means that only 0.2% of estates are taxable. Very few Americans now pay any gift or estate tax.
Bottom line: Will there be tax reform in 2016? Not likely; any realistic prospect for change will probably be delayed until after the November election.