Tuesday, July 8, 2014

Why Tax Practitioners Should Work for Tax Reform

Originally published on Passive Activities and Other Oxymorons on June 2nd, 2011.
If you have been paying attention to the carefully crafted persona of this blog, the title should be a tip off that another guest blogger is appearing.  I am the Humphrey Bogart of tax bloggers - "It is what it is. Deal with it." So I hope you find it refreshing when somebody idealistic comes walking into this gin joint.  Annette Nellen is a professor at San Jose State University. She has an excellent blog on tax policy called 21st Century Taxation.Here is what she has to say:

A lot of attention is being paid to tax reform. The past year has included:

President Obama's:
         PERAB Tax Task Force report (August 2010)
         Deficit Commission report (December 2010)
         State of the Union address calling for a reduction in the corporate tax rate (January 2011)
The National Taxpayer Advocate's call for tax reform (January 2011)
More than 15 hearings in the 112th Congress

Will anything happen? Well, trillion dollar deficits, a growing debt with its associated escalating interest expense, an unsustainable budget framework, and tax cuts that will expire (once more) after 2012, means that something has to change. The attention being paid by President Obama and Congress is likely more than lip service. Some type of tax reform is quite likely.

Will the changes bring something better? Will tax law complexity be reduced? Will the tax changes make sense? Can tax practitioners help? Yes!

Here are three reasons why tax practitioners should work for tax reform:

1. Financial – Today's complex tax system is costly. Practitioners spend inordinate amounts of time helping clients properly comply and engage in tax planning. There are costs involved in figuring out and staying current with complicated rules, as well as costs of mistakes and oversights that are almost unavoidable. Complexity is costly in terms of possible penalties, malpractice, and extra taxes paid when the best tax planning options are overlooked. Complexity means more time on tax research and less on helping clients grow their businesses and save for the future.

2. Stewardship, Professionalism and Expertise – Tax professionals understand the tax law and can play a crucial role to help identify weaknesses and possible solutions and to critique proposed reforms. Tax professionals should also consider responsibilities to the public and the tax law. Tax sections of key professional organizations state:

AICPA "advocates sound tax policy and effective tax administration."

ABA: Is "dedicated to creating and maintaining an equitable tax system that can be fairly administered. The [Tax] Section's work supports the integrity of the nation's voluntary system for tax reporting and payment. It evaluates the "simplicity, enforceability, fairness and probable effect of the tax system on economic, business and personal behavior....""

TEI: Its mission includes "to enhance and improve the tax system."

3. Responsible Citizenship – We are all taxpayers and citizens. Our tax system is not working well in terms of equity, fairness, transparency, simplicity, efficient collection, intergovernmental operations, international competitiveness and economic efficiency. We all have a responsibility to support and encourage appropriate reform to enable the tax system to serve its purpose of generating funds for government operations.

How? Write to your elected officials and explain one or two complexities your clients face and how they can be resolved. Tell them what tax obstacles exist to you and your clients growing your businesses. Let them know they can contact you to get your expertise on proposed changes. Get involved with your professional organizations and in your community. This is a great time for tax professionals to share and use their tax knowledge for an improved tax system.

PAOO Comment - Professor Nellen was selected by the AICPA to tesitfy before Congress on the need for comprehensive tax reform.  You can read her testimony here. In case you are wondering how I got somone with such impressive credenitals to guest post on my blog, it's pretty simple.  I asked. 

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