IRS scandal throws wrench into tax reform

Controversy seen slowing efforts to revise the code

May 19, 2013 @ 12:01 am

By Darla Mercado

Financial advisers can expect few changes in the tax law for the foreseeable future, thanks in part to the recent revelation that the Internal Revenue Service targeted conservative not-for-profit groups.

Although bitter feelings already exist across party lines, Ann L. Combs, principal and head of government relations at The Vanguard Group Inc., thinks that the scandal surrounding the IRS' treatment of Tea Party affiliates will sharpen that divide.

“The IRS situation that's unfolding now will make tax reform harder,” she told an audience at InvestmentNews' Retirement In-come Summit in Chicago last week. “It'll be hard to talk about tax reform, as everyone will be attacking the agency that administers the code.”


Despite the impasse, Ms. Combs thinks that some progress will be made in getting legislators to commit to the intention of tax reform, though actual changes are a long way off.

There was optimism this month that with House Ways and Means Committee Chairman Dave Camp, R-Mich., and Senate Finance Committee Chairman Max Baucus, D-Mont., would commit to a bipartisan overhaul of the tax code.

“This controversy sucks a lot of oxygen out of the room and distracts from tax reform,” said Steve Rosenthal, a visiting fellow at the Tax Policy Center.

“There is also the harm to a spirit of cooperation and collegiality,” he said. “Tax reform can only happen in coordination with the legislative and executive branches, and Democrats and Republicans.”


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