Tax Reform – What I Really Think Is Happening

Tax Reform – What I Really Think Is Happening

           I occasionally have the opportunity to travel to Washington, DC and represent the interests of real estate investors as they relate to doing real estate transactions. As an offshoot of that, I was in Washington, DC on the day of the very critical health care non-vote that the House of Representatives never held, which basically ended the first major attempt to reform Obamacare.

            When I was there just a couple weeks ago, tax reform was the main topic. Here is my bottom-line assessment (don’t hold me to it because in Washington, DC, one day is an eternity when it comes to how things can change).

            I believe we will see the tax rates lowered for almost everyone except those people making a million dollars or more a year. Much of the things people are worrying about now, such as whether certain deductions will be restricted or lost, will probably get stripped out of the bill due to various unpopular concerns. I anticipate that you will see a compromise bill from both the House and Senate that effectively lowers rates but does very little else.

             This will mean certain parties will start squawking about how this is going to increase the deficit. While the mindset that has taken firm hold in Washington, DC is that we can grow our way out of the current deficit, I believe that is a very convenient excuse for people who lack the self-discipline to say “no” and live on a budget. I’d say I’m about 80% confident that something significant will happen in tax reform because the rank-and-file Republican members of Congress know that if they don’t get something done, the election results a year from now will be an unmitigated disaster for them.

            The area that I’m going to be watching with the closest interest is what happens regarding taxation on profits on flow-through or pass-through entities. A lot of real estate investors, real estate agents and small business owners could be seriously affected by the proposed changes. By the time you read this post, we may have an idea of what the House of Representatives is actually passing after the arduous markup process and what is going to be sent to the Senate for them to work on and make changes and adjustments. It is only after the Senate and House have their respective versions passed that it goes to a conference committee where the real work will begin.