An update on the tax policy landscape against inflation backdrop
TAX ALERT | May 30, 2022
Authored by RSM US LLP
It is now over a year since inflation in the United States started to become a dominant economic issue. What was initially described by many policymakers as a transitory issue has proven to be more severe and longer-lasting than they expected.
Tax policy priorities and goals during inflationary times are almost always influenced by the need to address rising prices, including providing targeted relief to certain industries or individuals in need and easing the effects of increased costs to consumers.
The tax policy landscape in Washington remains unsettled as we approach the summer months. A stalled reconciliation measure, designed to advance President Joe Biden’s Build Back Better agenda (inclusive of potential tax law changes) casts a shadow over many of the current legislative initiatives, with the window for action on the reconciliation measure rapidly closing.
As a result, provisions that were included in the most recent version of the measure (which currently resides in the Senate)—such as a deferred effective date for section 174 capitalization, energy and climate proposals, and a series of proposed tax increases to wealthy individuals and corporations—hang in the balance.
Proposed legislation to address supply chain disruption and shortages is slowly progressing through a rare, bipartisan conference process that is expected to last at least several weeks. Prospects for the inclusion of a tax title in that legislation (beyond certain trade provisions) remain unclear. Also unclear is whether the formidable task of reconciling the House and Senate versions of this measure is possible at all.
Other proposed legislation that can be viewed as introduced due to the current inflationary environment include gas tax holidays, a windfall oil profits tax, and legislation that focuses on the so-called bad actors seeking to improperly benefit from the current economic situation. Such measures also face a difficult path, if any, towards enactment.
The approaching midterm election will surface informal and arbitrary deadlines, mostly more aspirational than anything else, as both tax and nontax matters compete for precious floor time in both chambers. The possibility of a year-end bill that bundles together unaddressed matters, such as tax extenders, is also worth watching.
The dynamics of a 50-50 balance of power in the Senate have been on full display throughout the current Congress, illustrating the extraordinary singular power of Democratic senators. Similarly, divergent views among House Democratic moderates and progressives on social spending programs and the scope of revenue-raising measures aimed at taxing the wealthy have repeatedly emerged at critical junctures, affecting the overall course of events.
As a result of the current political, economic and inflationary environment, it is impossible to accurately predict the likelihood of any potential tax changes. That means it will continue to be important to monitor events in Washington. There is still the possibility that tax rates may increase and that other changes will be made to the tax law this year. Forecasting and modelling remain vitally important.
2022 domestic and global tax forum
Join us on June 14 and June 16 for our two-day domestic and global tax forum to learn more about pressing issues and trends in local, state and international tax.
Call us at (800) 627-0636 or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Dave Kautter, Fred Gordon and originally appeared on May 30, 2022.
2022 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Lewis, Hooper & Dick, LLC is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Lewis, Hooper & Dick, LLC can assist you, please call 1-800-627-0636.