Candidate positions could have a huge and lasting impact on how practitioners work and plan.
by Rick Telberg/At Large
Just as President Bush was preparing last week to sign the tax extenders bill, officially known as The Working Families Tax Relief Act of 2004, I was sitting down with four of the best tax insiders in the business in their lower Manhattan offices. What they told me is essential information for every tax professional -- maybe even every taxpayer.
Seated around the conference table at tax and legal publisher, Thomson/RIA headquarters were:
-- Bob Scharin, who focuses on individuals and small business,
-- Bob Fuerst, for international and corporate issues,
-- Bill Massey, estate and gift tax planning, and
-- Dick O'Donnell, the pensions specialist.
Their attention was already shifting from the new tax bill to the next tax bill and the long-term ramifications of the upcoming election. Remember, they warned, Americans will be voting for more than just a President. One-third of the Senate is up for re-election and every seat in the House is open. With an election season as unpredictable and volatile as this, anything could happen. And it might. CPAs will need to maintain constant vigilance going into tax season.
For one thing, as soon as the election is over, no matter who wins or loses, there was still a chance late last week that there would be a lame-duck session of Congress to pass the ETI-FSC bill, which could be a 630-page whale of new, and perhaps retroactive, changes affecting almost every business, not just corporations, and adding a brand new wrinkle to tax accounting: differentiating between "service" and "manufacturing" incomes.
"They're going to do something, sooner rather than later," Massey said confidently.
But if the lame-duck session ends empty-handed on Nov. 20, it all starts over again in January. And that could cause real problems as CPAs get rolling into the 2005 filing season.
"Practitioners will have to look at the bill just to see how it affects their companies and clients before doing anything else," said Fuerst. "They'll need to be thinking, 'If we're not affected this year, what should we be doing to set up and qualify for the benefits next year?'"
And then it could all change again with a new Congress and new Bush or Kerry Administration. The presidential candidates' fundamental views of the tax system represent a major difference, hardly surfaced yet in the campaign.
Kerry, for instance, would roll back the Bush cuts and seek new revenues from those earning over $200,000 a year.
"There'd be more means-testing" under a Kerry presidency, according to Scharin. But the details remain murky and unpredictable, dictated by what Kerry could find on his desk when, if, he takes office.
Bush, on the other hand, has laid a strong vision of an "ownership society" that could radically change retirement planning, by replacing 401(k)s, SEPs, and SIMPLEs with LSAs, RSAs and ERSAs ("Lifetime," "Retirement" and "Employer Retirement" savings accounts).
"It's good for the small business owner, but not so good for the employee," according to O'Donnell's analysis, because it would eliminate the requirement that employers who set up plans for themselves must also offer coverage to their workers.
Plus, O'Donnell is quick to add that the defined-benefit Pension Benefit Guaranty Corp., already underfunded by maybe as much as $11 billion and under pressure by possible bailouts at struggling airlines, faces potential insolvency. It might need its own bailout, he said, reminiscent of the Resolution Trust Corp. after the savings-and-loan catastrophe of the 1980s.
During the campaign, Bush has briefly raised the issue of eliminating the income tax, without suggesting whether he'd replace it with a flat tax, a VAT, or a national sales or consumption tax. The one thing that the Group of Four agreed on was that a dramatic overhaul of the tax system, however desirable, remains a pipe dream.
But at least we can dream, can't we?
