President Obama has delivered his State of the Union address for 2015. The question always arises, after a speech by the President, whether any new legislation will result from presidential suggestions. Tax attorney Rob Wood offers his opinion in this report based on his Forbes article “State Of The Taxing Union? Platitudes So General They Could Be Pitching Flat Tax.”
Wood says that there were some interesting suggestions but that they are more relevant to the next two years than to the immediate future. Given that Republicans control both the Senate and the House of Representatives, an increase on the capital gains tax rate to 28% “is not likely.” Some of the other matters discussed by the President were not new, including a bank tax proposal. But “most of it is just posturing for a presidential election,” in Wood’s opinion. It’s unlikely that there will be a major tax bill “in the next year or so.
Both political parties seem to be interested in reducing the corporate tax rate to 28%, and that might be are area where there could be agreement. America’s tax rate of 35% is high compared to tax rates in other countries. However, Wood suggests that many companies, large and small, are not actually paying the 35% rate. “They are finding a way with transfer pricing or other . . . international strategies” to avoid the full tax rate. And that sort of revision takes time.
Wood believes that the IRS might actually collect more corporate taxes by having a lower corporate tax rate. The question is, how would such a reduction be implemented? Wood feels that it is unlikely that such a change could be brought about by a one-line change to the tax code; more likely, it would involve comprehensive revision of the code.
Wood hopes that the onset of campaigning for the presidential election in 2016 will bring about renewed interest in a flat tax. Wood supports the idea of the simplicity of a flat tax. However, he doubts that such a plan has a chance because it is viewed as regressive.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.