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Maybe 40 is Biden’s lucky tax reform number

As an accountant, I use numbers.

Many people believe accountants are good with numbers. Most accountants would be challenged by differential equations. But basic numbers are our thing.

What we do well is the math that Jethro Bodine of “The Beverly Hillbillies” dazzled the Clampett clan with, such as “goesintas.” That is, four goesintas 16 four times and so on.

The Bible is kind to accountants because it uses numbers within our degree of difficulty. Forty is a big one. How long was Moses in Egypt? How long did Moses wander the desert? How long did the flood last? How long was Jesus tempted? All 40, just days or years.

The number 40 may also bookend two tax acts that are seemingly unrelated, yet sharing one feature.

In 1981, newly elected President Ronald Reagan wanted a tax bill really badly. By August, he had swung a Democratic-led House to his side and we had major tax legislation.

Here we are 40 years later. In 2021, Joe Biden took office. He too wants major tax legislation. For his legislation to pass unaltered, a miracle will likely be needed. Maybe 40 years is the right time for a miracle.

Let me address the similarities with the 1981 Act and the 2021 proposals. I do so without regard to my personal views of the merits of each bill. That analysis will not support equivalence.

Where they are similar is that they have a vision based on adoption of a value system. A vision, or a set of values, has been sorely lacking in recent tax legislation.

The 2017 legislation was a big tax cut. Other than that, it is impossible to see any logical structure to that legislation.

As former Treasury Secretary William Simon said, “The United States deserves a tax system that looks like it was designed on purpose.” We didn’t get what we deserve in 2017.

The 1981 Act was designed to encourage investment in new productive equipment. It did so with tax credits, shorter lives to depreciate assets, and lower tax rates.

It was called “supply side” by proponents and “trickle down” by detractors. Whatever you thought of it, there was a vision based on adoption of a value system.

Joe Biden’s 2021 proposals are also based on a vision founded upon a value system. In that respect, the Biden tax bills are impressive tax policy. I say this not as an endorsement.

No one needs the endorsement of Jim Hamill, or of any other unelected individual. Having suffered through legislation that represented unthinking tax policy, I simply admire the consistency of the Biden proposals.

Reagan 1981 focused on investment incentives with a dash of estate tax relief on the side (the exemption increased from $175,000 to $600,000 over six years).

Biden 2021 focuses on renewable and clean energy and family tax relief at the expense of higher taxes for the high income and multinational corporations.

I’ve always believed that the elected officials, no matter how bad they are, get to decide the vision and values that drive our laws. If we, and by “we” I mean the majority, don’t like what is done it’s our own fault if we keep these people in office.

What I cannot tolerate is a lack of vision and values. And that’s what we’ve had in recent tax acts. Lower taxes is neither a vision nor a value. There has to be some thematic aspect to the lower taxes, like existed in Reagan 1981.

The same may be said for higher taxes. However, Biden 2021 has a theme. I would say four themes. New energy. Family relief. Higher corporate taxes with a focus on global consistency. In addition, higher taxes on capital.

The elected officials get to set the values that drive these themes. Nevertheless, they are themes. There is an underlying policy. And whether I like it, you like it, or the guy behind the tree likes it, it is a policy.

The 2017 legislation could not be explained in any logical way. The provisions came from lobbyists and therefore were unconnected.

Forty years of wandering. At least we now have a theme that we can raise up or tear down.

James R. Hamill is Director of Tax Practice at Reynolds, Hix & Co. in Albuquerque. Contact him at jimhamill@rhcocpa.com.

 



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