The newly formulated tax plan (upon being signed into law) is potent enough to cause disruption in the long run as it is full of glitches and many other issues.
There can be misutilization of certain provisions that have been created to reduce the taxes, specifically the”pass-through” business which can largely lead to avoidance of the taxes, rendering the provision futile.
Other provisions would lead to unexpected outcomes. For example, the judgment which ordered for retaining the alternative minimum tax would lead to the invalidation of the break for the expenditure related to research and development – even though the provision had been formulated with a motive to ensure that the affluent section doesn’t evade taxes totally.
Most other provisions have not been clearly mentioned, like the definition of ‘endowments’ for the affluent universities who earn huge amounts through thousands of accounts, which will now be taxed.
Another vital point is that people won’t have enough time to adapt to the new tax regime which will be implemented on Jan 1. The duration is too short for the experts to comprehend it. Previously, such pace had led to legislative chaos as Republicans had not let the Congress settle the Affordable Care Act.
The main motive behind compiling a tax legislation must include prediction of the tax lawyers’ game plan, analyzing how the different sections of legislation would interact in surprising ways and approach to deal with taxpayers’ unforeseen situations.
The strange thing is the absolute scope of the legislation before the lawmakers and the pace at which efforts are being put to present it before the Capitol. The draft has been passed by the House in two weeks which took six long months for Democrats to pass the Affordable Care Act.
Moving at this pace would amplify the problems, some of which could be addressed by negotiators, but tackling some of the problems might be too expensive for the lawmakers. Democrats would try to prevent Republicans from passing any further legislation to tackle problems due to lack of “reconciliation” protection.
A comparatively slower approach to get the problems solved by the Treasury using the government regulations could be adopted, but a majority of the Republican strategies would be enforced on Jan 1.
A range of problems would require attention – some would fake their income to come under the canopy of 23% deduction for the pass through. The Senate’s tax-avoidance practices causing a loss in businesses would prevent people from commencing companies leading to the unfulfillment of their intention of promoting the business environment.
It has been accepted by Republicans that they have apparently mismanaged various aspects of working of the offshore profits of multinational companies, for which they intend to pay extra attention to avoid any inapt outcome. Besides the one -time tax, a new approach to tax multinational companies has been incorporated in the House bill which experts are still trying to comprehend.