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September 18, 2014 at 09:08 AM
Aventura, FL – Many gripe about Congress failing to do a thing about anything, but if you’re in the retirement business, gridlock can be good.
That’s because efforts at tax reform, stalled for most of the year, threaten to wipe away at least some of the $83 billion in annual tax exclusions related to pension plan contributions and earnings.
Russell Sullivan, who watches Capitol Hill as a senior advisor with McGuireWoods Consulting, says there’s plenty of reason to be skeptical lawmakers will tackle tax reform any time soon.
Speaking Wednesday at the 67th annual Plan Sponsor Council of America meeting, Sullivan acknowledged inversions – in which companies such as Burger King have reincorporated abroad to cut their tax bill – could provide momentum for tax reform.
But there are a number of big hurdles that stand in the way, he said. For starters, tax reform cannot happen without all-out support from the president, Sullivan said.
The Obama White House offered a general draft on business taxes about two years ago but no details have followed. The last time the tax code saw a major overhaul was in 1986, after former President Reagan made it an administration priority.
The complexity of such an overhaul could simply overwhelm it, Sullivan said, noting that once Americans see how many tax breaks they stand to lose in order to get a significantly lower tax rate, they may not want it. Along those lines, targeted industries also can be expected to gear up to protect their specific deductions or credits.
And then there’s the question of whether Republicans will tackle tax reform, which hinges on whether the GOP can take control of the Senate in the coming midterms.
