January 25, 2012

A quick note that the early tea leaves on tax are that we will deal with extending payroll tax relief for the rest of the year in February.  After getting pounded on the issue late last year, look for the Republicans to try to find a resolution to payroll tax sooner rather than later – with the main focus being on payfors/offsets.  It always gets back to scoring. 

 

I anticipate that there will be some grind about including “Carried Interest” changes as a partial offset for payroll tax – given Romney's recent comments about being taxed at 15%.  Look for a similar dance as last year on the millionaire's tax – with the Democrats proposing and the Republicans opposing – and nothing happening at the end on carried interest.

 

There is a very outside chance you will get business tax extenders included in the payroll tax extension (especially if there is a decision not to offset the payroll tax).  I think it's unlikely to be included at this time and extenders are most likely going to be addressed later in the near and quite possibly after the election.  Look for a repeat of 2010 and the business taxes are extended seamlessly so there is no break in benefits.  No question extenders will happen – only question is when. 

 

In general, nothing will happen on tax reform this year (although look at Chairman Dave Camp's proposal on international tax reform as a good blue print of what would be done in this area when Congress finally gets to the issue). 

 

In fact, nothing significant will happen in tax until after the election.  All the decisions regarding the expiration of the Bush/Obama tax provisions will be put off until November – and the elections will largely determine their fate. 

 

UPDATE:  State of the Union Speech – I wrote the above before the President's speech last night.  Well the speech just underscores that carried interest will be bounced around like a beach ball in a stadium this year.  As to the rest of the tax proposals (except payroll) from the White House – no surprise they are basically going to go nowhere this Congress.  The implications of the proposed 30% minimum tax – capitals gains – impact on investing, pass-thrus, dividends, tax-exempt bonds, etc. – will certainly be talked about a good deal in the days ahead.   As a sidenote – I do like the President mentioning going after universities and colleges that increase tuition by leaps and bounds every year (something I pounded on when on the Senate Finance Committee).  We will see if the proposal ends up with real teeth.