Wall Street Journal Discusses Consequences of a “Temporary Tax Code”
Today’s Wall Street Journal (subscribe) has an in-depth article on the consequences of making so many tax provisions temporary. Here’s an excerpt:
In the late 1990s, there were typically fewer than a dozen tax provisions that had just a limited lease on life and needed to be renewed every year or so.
Today there are 141.
Now Congress, taking up a deal worked out between the Obama administration and Republican leaders, is poised to turn the whole personal income-tax system into something of a temporary structure. The plan embraces a broad range of provisions-an extension of Bush-era rates, a new estate-tax formula-but for only two years. A payroll-tax cut in the bill is for a single year.
This means that if the compromise passes largely intact, the U.S. will have no permanent regime governing levies on salaries, capital gains and dividends, the Social Security tax, as well as a slew of targeted breaks for families, students and other groups. This on top of dozens of corporate-tax provisions that already were subject to annual renewal.
The level of uncertainty, unusual for developed nations, complicates planning and discourages hiring and investment, many economists and corporate executives say.
“I haven’t seen anything like it, and it’s hard historically to find anything like” the current and pending negotiations, says Mortimer Caplin, an Internal Revenue Service commissioner in the Kennedy administration who at 94 is just three years younger than the income tax itself. “This Congress has left an awful lot up in the air.”