We don’t yet have a clear picture of what the tax law will look like in 2018. While the U.S. House of Representatives passed its version of tax reform (Tax Cuts and Jobs Act), the Senate’s version of the bill (yet to be voted on at the time this is being written) includes significant differences.
Every day seems to bring new details and information concerning federal tax reform. Both the House of Representatives and the Senate have recently issued their tax reform plans. There are significant differences between the two, and the process of reconciling the differences has begun … and so has the lobbying.
Guiding Principles of Good Tax Policy
When evaluating changes to tax policy, proposals should include an analysis of their impact on existing tax laws. The AICPA Fundamental Tax Reform Task Force, along with several other technical and policy committees, developed The Guiding Principles of Good Tax Policy: A Framework for Evaluating Tax Proposals.
The PICPA supports these principles for the U.S. tax code, and an analysis of any proposals should weigh these guidelines:
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- Equity and Fairness – Similarly situated taxpayers should be taxed similarly.
- Certainty – Tax rules should specify when a tax is to be paid, how it is to be paid, and how the amount to be paid is to be determined.
- Convenience of Payment – A tax should be due at a time or in a manner that is most likely to be convenient for the taxpayer.
- Economy of Collection – The costs to collect a tax should be kept to a minimum for both the government and taxpayers.
- Simplicity – Tax laws should be simple so taxpayers understand the rules and can comply with them correctly and in a cost-efficient manner.
- Neutrality – The effect of the tax law on a taxpayer’s decision as to how to carry out a transaction or whether to engage in a transaction should be kept to a minimum.
- Economic Growth and Efficiency – The tax system should not impede or reduce the productive capacity of the economy.
- Transparency and Visibility – Taxpayers should know that a tax exists and how and when it is imposed upon them and others.
- Minimum Tax Gap – A tax should be structured to minimize noncompliance.
- Appropriate Government Revenues – The tax system should enable the government to determine how much tax revenue will likely be collected and when.