Key Takeaways
- In which your author steps away from Tax News & Views.
- The blog continues.
- Capital gain indexing divides GOP.
- A new IRA website.
- Tax reform and the debt problem.
- Tax reform decay.
- In closing.
This is my last post here. Beginning tomorrow I go on limited duty - a sort of pre-retirement sabbatical - ahead of my full retirement later this summer.
I started blogging at my predecessor firm in November 2001 and continued until we merged into Eide Bailly in 2017. I resumed in 2020, just in time for the pandemic. I have learned so much doing this. I have gotten to know a lot of smart and nice tax people, and even have had the chance to meet some of them in person.
It's been a wonderful ride, but it's time to hand it off. Alex Parker takes over responsibility for Tax News & Views. Melissa Menter and Colette Sutton will continue their great SALT work. Chad Martin will still provide his brilliant and irreverent transfer pricing commentary. Expect great things.
I have a personal Substack that will occasionally have tax policy thoughts that I want to get off my chest. It's free; I don't want to feel like I'm owing anyone regular content. I will be busy with other things.
I will always be indebted to the people in the tax world who provide grist for the blog. The tax trade reporters at Tax Notes, Law360, and Bloomberg do a great job. The Wall Street Journal, Washington Post, New York Times, and Forbes provide high-quality general audience tax coverage. The tax blogosphere and #taxtwitter have been a great source of ideas, inspiration, and links.
Eide Bailly management and professionals are wonderful people and have been unfailingly helpful and supportive. They are smart, creative, and great at what they do. If you need accounting help, hire them. If you are looking for accounting work, apply with them.
I am most indebted to you, dear reader. Without you, this would have been no fun at all. Thank you.
Not Everyone Likes Indexing
Press for New Capital Gains Tax Cut Divides Republicans - Steven Dennis and Caitlin Reilly, Bloomberg ($):
The proposal to index capital gains for inflation could be in play for a tax-and-spending package later this year, though the likelihood of a bill coming together before the midterms remains low as a key House Republican has voiced reservations. Some Republicans have pushed President Donald Trump’s administration to make the change unilaterally.
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The optics could be tricky for Republicans heading into the midterm elections in November since nearly all of the tax break would go to the top 20% of earners, with the top 0.1% collecting the greatest savings, according to the Yale Budget Lab.
Executive Order for an IRA Website
Exclusive / Trump to sign order expanding workers’ access to retirement plans - Eleanor Mueller, Semafor:
The administration will integrate its push with the so-called Saver’s Match, 2022 legislation that directs the federal government to match retirement-plan contributions from workers making less than $35,000 with up to $1,000 starting next year.
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About 54 million people who work full- or part-time do not have access to an employer-provided retirement plan, according to the Economic Innovation Group. Some 27 million who qualify for the Saver’s Match do not have access to a plan where they can collect it.
Thursday’s executive order will seek to fix that by directing the Treasury Department to launch a new website, TrumpIRA.gov, by the time the Saver’s Match takes effect in January, one of the officials said. Under the order, workers could use that website to filter private-sector retirement plans by factors like cost, minimum contribution, and minimum balance so they can enroll in one that would allow them to collect the match if eligible.
Related: Eide Bailly Compensation & Benefits Services.
Debt and Taxes
Can Tax Reform Solve the Debt Problem—or Just Slow It? - William McBride, Tax Foundation:
-Most of the projected deficit is from rising interest payments on the debt, but the primary deficit that excludes interest costs is also large, averaging more than 2 percent of GDP over the next decade, and growing in the long run primarily due to growth in spending on Social Security and Medicare.
-Closing the primary deficit is the key to debt sustainability, but attempting to do so by tax adjustments alone would involve unprecedented tax hikes that slow the economy and encourage avoidance, reducing revenue gains over time.
-This study simulates several large tax increases and consistently finds that even tax increases large enough to close the primary deficit in the near term will lose ground over time and fail to put the debt on a sustainable course.
-The most popular proposals, from hiking taxes on the rich to raising tariffs, tend to target a narrow set of taxpayers and produce the least sustainable revenues. These options are likely to introduce large economic distortions and slow economic growth without substantially improving the debt trajectory.
-The results suggest deficit reduction efforts should focus first on reducing the growth of major entitlements, and second on relatively efficient, broad-based tax increases.
These problems could have been tackled with much less pain when I started blogging over 20 years ago.
Most people fail to understand just how big the government and its debt is relative to anything in the private sector. For example, Elon Musk's net worth - not his annual income - is estimated at about $811 billion. This amount would fund the government for about 40 days.
We aren't going to solve the government's overspending by taxing the rich guys. There aren't enough of them, and there just isn't enough money there.
U.S. Debt Tops 100% of GDP - Richard Rubin, Wall Street Journal:
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CBO projects that debt will rise to 120% of GDP by 2036 and 175% by 2056. Those forecasts assume that President Trump’s new tax cuts, such as the deductions for tips and overtime pay, expire as scheduled over the next few years. They also assume tariff levels that predate the Supreme Court decision restricting Trump’s authority.
Whither The Tax System
Tax Reform Is Dead. Long Live Tax Reform. - Joseph Thorndike, Tax Notes Tax History Project:
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The 1986 settlement began to unravel almost immediately. The rate bargain broke first, when President George H.W. Bush agreed to raise the top rate in 1990. President Bill Clinton pushed it higher later in the decade. The base bargain eroded quickly, too, as Congress created or expanded a wide range of new credits and incentives designed to woo voters and satisfy lobbyists.
More to the point, tax reform started to focus on one half of the 1986 bargain: tax cuts. The process was gradual, extending across the first two decades of the 21st century. But the 2017 tax law was an important transitional point. Supporters defended the measure as genuine reform in the 1986 model, and certain elements of the law had a solid claim to the old definition of reform (especially the simplified and expanded standard deduction).
But the Tax Cuts and Jobs Act — as its name made clear — was really driven by a commitment to tax reduction, not traditional notions of tax reform. The law contributed to base erosion in numerous ways, including the section 199A passthrough deduction, which won a Cato Institute contest for “worst tax expenditure.” (Adam N. Michel, “Pass-Through Deduction Wins Worst Tax Expenditure,” Cato at Liberty blog (Apr. 7, 2025).)
The 1986 reforms are as close to making the tax system make sense as anything that has passed in my tax career. Its unraveling has had many causes. A few:
- Budget rules that require "pay fors." While well-intended, they encouraged tax gimmicks, like "temporary" tax breaks having to be extended, delayed effective dates, and hidden tax brackets from deduction phase-outs.
- Using the tax law to solve non-tax problems. The failure of Enron is but one example. While the underlying problem in Enron was accounting fraud and self-dealing, it resulted in a Rube Goldberg set of rules on deferred compensation that saddle every business with compliance costs and tax risks via the draconian Sec. 409A penalties.
- Pretending that big new programs can be financed by just taxing "the rich" a little more. The Affordable Care Act is a case study in this, with its taxes primarily affecting taxpayers earning over $250,000 - and falling far short of the program's funding needs. The Biden doctrine of only increasing taxes on incomes over $400,000 is another example.
The current infatuation with bespoke tax breaks - the "No Tax On" breaks for overtime, tips, and so on - show how far the political environment has decayed from the "broaden the base, lower the rates" spirit of 1986.
Tariff Refunds Pending
In Tariff Refund Process, First Payment Set to Go Out May 11 - Erik Larson and Zoe Tillman, Bloomberg ($):
About 21% of import entries subject to tariffs under the International Emergency Economic Powers Act, or IEEPA, have been accepted so far to have those duties removed through a new Customs and Border Protection process, which began last week, according to an order Tuesday by Judge Richard Eaton the US Court of International Trade.
Eaton, who is overseeing the refund process, said about 3% of IEEPA entries are in the refund stage of that process, which will culminate in electronic payments from the US Treasury. Eaton issued the order following a closed-door hearing in Manhattan. Another hearing is set for May 12.
International News: Digital Taxes Proliferate
Tax News & Views International Weekly: The Digital Tax Gulf - Alex Parker, Eide Bailly:
The issue pushed its way back to the headlines recently after President Trump issued another blunt threat last week, claiming he may put “a big tariff” on the United Kingdom if it doesn’t repeal the country’s digital services tax, which has been in place since 2020.
The United Kingdom defended the tax as a “fair and it’s a proportionate approach to taxing business activities undertaken in the U.K.,” and said it would only repeal the tax as part of a compromise reached at the Organization for Economic Cooperation and Development, where officials have fruitlessly looked for a workable solution for years. (Other countries such as Canada and Pakistan have rescinded their versions of the tax.)
While Pillar Two’s global minimum tax is still largely theoretical, DSTs have become part of the international tax landscape for years. According to the U.K., the tax raised more than a billion U.S. dollars from 2025-26, a record.
Related: Eide Bailly International Tax Services.
Blogs and Bits
New online IRS tool helps taxpayers resolve tax debt - Kay Bell, Don't Mess With Taxes. "The new Tax Debt Tool, as the tax agency has dubbed it, is atop IRS.gov’s special Get Help With Tax Debt page."
Tax professionals say missing documents, not complexity, drove filing challenges this season - National Association of Tax Professionals. "In many cases, taxpayers believed they had submitted everything needed, only for additional documents or discrepancies to surface late in the process. This required additional follow-up before returns could be finalized and filed."
District Court Vacates Micro-Captive Listed Transaction Regulation - Parker Tax Pro Library. "The court found that under Code Sec. 6707A, micro-captive transactions must be presumptively tax avoidant in order to be described as listed transactions, and the IRS failed [to] show that the transactions described in Reg. Sec. 1.6011-10(c) met that standard."
In Closing
Keep good records. E-file. Use electronic payments. File on time even if you can't pay. Some things you read about tax on the Internet aren't true. Never send tax information as an e-mail attachment. Beware the IRS secret shopper. Cheap tax help can be the most expensive kind. The biggest refund doesn't indicate the best preparer. It's better to extend than amend. Not every problem is a tax problem. Taxes aren't everything, but they are a thing.
Be careful out there.
What day is it?
It's National Bugs Bunny Day! That's all, folks!
