My Thoughts on the Future of Taxes

Tax law is a critical component of government policy, influencing economic behavior, revenue generation, and social equity. The future of tax law is a subject of ongoing debate, with significant attention given to the potential for simplification. My personal thought is simplification is a necessity, but the tax system was NOT designed for the working man.

Current Landscape of Tax Law

1. Complexity:

   • Tax law is inherently complex due to frequent changes, a variety of tax types, numerous deductions and credits, international considerations, and extensive compliance and reporting requirements.

   • Frequent updates through new legislation, administrative rulings, and court decisions necessitate continuous adaptation by taxpayers and professionals.

2. Variety of Taxes:

   • Includes income tax, corporate tax, payroll tax, sales tax, property tax, and estate tax, each governed by distinct rules and regulations.

3. Deductions and Credits:

   • Designed to incentivize behaviors such as home ownership, education, and energy efficiency, adding layers of complexity to the tax code.

4. International Considerations:

   • Globalization introduces additional challenges, including international tax treaties, transfer pricing rules, and foreign tax credits. I don't even care to learn this side of the profession, but I know this impacts the future.

5. Compliance and Reporting:

   • Extensive requirements for tax reporting and compliance involve detailed record-keeping and timely filing of various forms and schedules. I think this evolves to personal budgeting and understanding the impact of financial discipline over a sustained period. Consistency also is important in document retention.

     
     

Key Factors Influencing Future Changes

1. Political Climate:

   • The likelihood of tax changes depends on the political environment. A strong majority and clear mandate can facilitate tax reforms, while a divided government just creates a see-saw effect. The consumer pays the tax regardless of who the president is.

2. Economic Conditions:

   • Economic factors such as inflation, unemployment rates, and overall economic growth influence tax policy. Governments may adjust tax rates and credits in response to economic conditions. How do we plan for the future of the country?

3. Public Opinion:

   • Tax changes with broad public support are more likely to be implemented. Policymakers consider constituent views and re-election prospects when proposing reforms. It has become a popularity scale and not what is best for the future.

4. Complexity and Feasibility:

   • Simplified tax reforms that are easy to understand and administer are more likely to gain traction than those requiring significant overhauls. This threatens jobs including my own because a simplified process eliminates the need for a preparer.

5. Impact on Taxpayers:

   • The potential impact varies depending on the nature of the changes. Tax cuts can increase disposable income, while tax increases can provide additional revenue but may reduce spending and investment. I think we have a system that was built for a complaint society, but a large portion pays minimal taxes utilizing the current code.

6. Administrative Considerations:

   • Effective implementation and enforcement by tax authorities are crucial. Changes requiring significant updates to administration systems may face delays. Budgets are always a conversation. I think a national agenda will be the goal versus who is in office.

   
   

Prospects for Simplification

1. Simplification Efforts:

   • There is a broad consensus that the tax code is overly complex. Simplification could reduce compliance costs and improve fairness. There are over 800 national tax forms today and I think 99% of the country isn't qualified to use most of them. This is why education is important.

   • Proposals include consolidating tax brackets, eliminating certain deductions, and streamlining filing processes. Some cuts have been completed already.

2. Tax Reform:

   • Comprehensive tax reform is frequently debated to address economic inequality, corporate tax rates, and the taxation of digital and gig economy income.

   • Recent reforms, such as the Tax Cuts and Jobs Act of 2017, have made significant changes, but further reforms are often proposed. The corporate transparency act will bring accountability to business owners but again in my experience most small business are struggling to get by and looking for ways to save money and not who is in office.

3. Digital Economy:

   • The rise of digital businesses and cryptocurrencies presents new challenges. Discussions are ongoing about how to effectively tax digital transactions and assets. I am still learning about this as we all do.

4. Environmental Taxes:

   • Growing concerns about climate change have increased interest in using the tax system to promote sustainability through carbon taxes and other green incentives. I remember talking about recycling as a kid but we consume so much as a nation that I would vote a tax on trash is needed…My inside joke.

     
     

The future of tax is a combination of political, economic, and administrative factors. While there is significant interest in simplifying the tax code, achieving meaningful simplification will require balancing various interests and overcoming practical challenges. Ongoing discussions and proposals indicate a continued focus on reforming and adapting tax laws to meet new realities and societal needs. I think people really need to understand how this affects us on a daily basis. I aim to keep learning and sharing!