A “perfect storm” of election year politics and partisan posturing in the current Congress promises to make 2012 the most difficult year in memory for business taxpayers and their advisors. While we have a right to plan our affairs to pay the least amount of tax legally due, that’s a hard right to exercise when the law governing transactions in 2012 could change anytime before December 31. 2012.
Critical tax provisions, usually having “broad, bipartisan support” were allowed to expire on December 31, 2011. Among them,loss of the research credit is likely to be responsible for increasing the effective tax rate of thousands of large and small enterprises. The dizzying “now you see it, now you don’t” whirl of special, limited time, rules for various asset depreciation classifications and schemes have all expired . . . for the moment.
The problem, as I see it, is that a bunch of elected Representatives and Senators with little or no historic memory of why the tax code is this way or that way, are going to make campaign promises regarding the tax law. Then, in late November or early December, another hodge-podge of special interest tax breaks and economic pacifiers to quiet this group or that group will pass both houses of Congress. The current President’s background as a social activist hardly prepares him to make a meaningful contribution to the process.
Is there an answer ? Yes, but you may not like it.
Make no tax motivated changes. Initiate no transaction for which the tax benefit or cost is a significant element in analyzing return on investment. Will that help the economy ? Hell no ! It simply assures that portion of the gross national product dependent on private ownership will be “on hold” while the politicians ponder, posture and pontificate about the need to stimulate the economy.
It’s going to be difficult year for tax advisors !
