Business tax reform and trends: survey views
Views on the prospects for federal tax reform
In The Tax Council - EY Tax Reform Business Barometer, we assess business tax professionals’ current views on the prospects for and key aspects of federal tax reform1. The Barometer measures the expected likelihood of the different stages and key elements of federal tax reform.
This monthly survey tracks trends in the views of business tax professionals while tax reform is debated and developed in the US Congress. This is the sixth monthly Barometer. It tracks the views reported between 10 and 17 March 2014. 2
- Business tax professionals continue to think tax reform will most likely be comprehensive, affecting both individual and corporate taxation. Most (55%) also expect tax reform will raise revenue. Thirty-nine percent believe it will be revenue neutral, and 6% think it will reduce revenue.
- Even with Chairman Dave Camp’s release of his proposal, respondents only gave a median expectation of one - in - five that the House Ways and Means Committee will begin a tax reform markup in 2014. Fewer respondents believe the House Ways and Means Committee will approve tax reform legislation by the end of 2014 (median 5%), and an even smaller number think the House of Representatives will pass tax reform legislation this year (median 0%).
- Respondents gave a median likelihood of 10% that Senate Finance Committee Chairman Ron Wyden will release a new tax reform proposal in 2014. Respondents generally believe federal tax reform will be enacted no sooner than 2017, in the first year of the next president’s term.
- Eighty-five percent of respondents believe Chairman Camp’s proposal will potentially help the overall US economy. Fewer think that it will be helpful to their industry (50%), and even fewer believe it will be helpful to their company (49%). Forty-eight percent of respondents said it will definitely help the overall economy, while 37% said it will possibly help the economy.
- Sixty-four percent of respondents agree that Chairman Camp’s international tax proposals are a positive step forward in the US international tax reform debate.
- Business tax professionals are almost equally split regarding whether Chairman Camp’s proposal would simplify the US tax code. Forty percent believe it would simplify the tax code, 46% think it would not, and the remainder do not know or do not have an opinion.
- Most respondents continue to expect the major expired tax provisions to be retroactively extended before the end of 2014 (73% average likelihood). When asked about the effect of Chairman Camp’s tax plan on expiring provisions, one-third of respondents expect all of the expiring provisions to be extended, with more than half expecting some or all of the provisions to be allowed to expire.
The Barometer is a monthly survey of approximately 80 leading US tax executives and practitioners that tracks trends in the views of business tax professionals while tax reform is debated and developed in the US Congress. The survey results are based on an online survey conducted by our Quantitative Economics and Statistics practice.
Note: The TTC/EY Tax Reform Barometer defines tax reform as legislation that substantially broadens the tax base or changes the tax rate for either corporate or individual taxpayers.
Prospects and timing of federal tax reform
Business tax professionals are less optimistic than they were in early February regarding the prospects for tax reform in 2014. The median expected likelihood that the House Ways and Means Committee will begin a tax reform markup is one- in- five, three percentage points down from February’s results.
Respondents generally think there is a one-in-twenty likelihood that the Committee will approve tax reform legislation in 2014, and there is no expectation that the House will pass tax reform legislation this year.
Even though Senate Finance Committee Chairman Ron Wyden has expressed interest in tax reform, survey respondents continue to think it less likely that the Senate will undertake tax reform-related action this year. The median expectation is only 10% that Wyden will release a new tax reform proposal in 2014, and no respondents expect tax reform to move further.
Change in business tax professionals’ median expectations for tax reform action in 2014
The business respondents gave a 1% average likelihood of tax reform occurring in 2014. This is down from 20% in November 2013, 9% in December 2013, and 5% in February of this year. A few respondents gave a small likelihood that tax reform might happen. Even if tax reform is not enacted by the end of 2014, the actions taken during 2014 (e.g., hearings, debates, chairman’s drafts, committee legislation, additional proposals) are expected to influence any future tax reform.
The median respondent continues to think that federal tax reform will be enacted no sooner than 2017, in the first year of the next president’s term. According to respondents, there is less than a 50% likelihood that tax reform would be enacted before 2017.
Respondents give about a one-in-three likelihood that tax reform will happen in the 114th Congress (2015–16), a 44% likelihood in the 115th Congress (2017–18), and a 24% likelihood that tax reform will occur after 2018 or never. The respondents have increased their expectation that there will be no federal tax reform in the foreseeable future from 15% in November 2013 to 24% in March 2014.
Business tax professionals’ average expectations for timing of tax reform enactment
Other tax policy issues
- Respondents were also asked how likely it was that the major expired tax provisions will be retroactively extended within particular time frames. Similar to February’s results, most expect Congress to extend the provisions in the second half of 2014 (63% likelihood), and only a handful think the expiring provisions will be extended during the first half of 2014 (10% likelihood). Respondents gave a 20% likelihood that the provisions will be extended in 2015 or later and a 7% likelihood that they won’t be extended at all.
- It is likely that the prospects for federal tax reform and the expectations of leading US tax executives and practitioners will continue to change throughout 2014. The Barometer will continue to gauge changes in the expectations for tax reform, including during any significant milestones in the legislative process and over the remainder of the 113th Congress.
1 The TTC/EY Tax Reform Business Barometer defines tax reform as legislation that substantially broadens the tax base or changes the tax rate for either corporate or individual taxpayers.
2 Eighty-three leading US tax executives and practitioners completed this month’s Barometer. Results are based on an online survey conducted by EY’s Quantitative Economics and Statistics practice.