Hope and expectations for both corporate and individual tax reform are running high among financial advisers, many of whom believe real progress can get done as early as this year.
"Thinking back to the last significant tax reforms during the [Ronald] Reagan and [George W.] Bush administrations, it only took about six months to get it done, and I do expect tax reform this year," said Bryan Beatty, partner and financial planner at Egan, Berger & Weiner LLC
"If you don't see tax reform, I think we'll see a big pullback in the stock market, because reform is expected," he added.
Topping the list of reform expectations is a dramatic cut to the corporate tax rate, down to between 15% and 20%, from 35% today.
Mr. Beatty also hopes any corporate-tax reform package includes various pass-through legal structures like limited liability corporations commonly used by registered investment advisers.
Currently, these pass-through entities are treated for tax purposes like individuals, meaning an owner's tax rate is set by whatever the business earns.
Even though corporations only contribute about $350 billion, or 11%, of the $3.25 trillion in total U.S. tax revenues, corporate tax reform is seen as a key element to fueling increased business activity and discouraging corporate inversions that involve companies relocating their headquarters to more tax-friendly countries.
"I'd like to see a territorial tax that would encourage multinational companies to spend more money in the U.S.," said Leon LeBrecque, managing partner and chief executive officer at LJPR Financial Advisors.
"We're the only developed nation that hasn't cut corporate taxes since 2006," he added.
Considering President Donald J. Trump's propensity to speak in vague generalities, it isn't surprising that some financial advisers are not yet clear on exactly what might be in the works regarding tax reform. But that isn't tempering the optimism.
"At this point, it's truly unclear as to what tax reform looks like or when it will happen, but it is definitely an important topic," said Mark Germain, chief executive of Beacon Wealth Management.
Corporate tax reform, he added, should be designed around getting companies to "re-patriot."
"If Congress allows the companies to bring the money back into this country at a moderate tax rate, those companies are going to spend it here," Mr. Germain said.
In terms of individual tax reform, Mr. Germain is jumping on the Warren Buffett bandwagon by supporting an end to the carried-interest rule that enables member of private investment partnerships to have income taxed at capital gains rates, as opposed to ordinary income rates.
"If you want to make the tax system simpler, my position is get rid of carried interest," Mr. Germain said.
Simplicity has become a growing theme among those seeking real tax reform out of Washington.
Along those lines, Mr. Beatty supports reducing the number of tax brackets down to three from the current seven.
Simplifying and reducing individual tax rates, he said, would likely spark a wave of conversations from individual retirement accounts to Roth accounts, triggering taxable events that would boost tax revenues.
"It would be the opposite of what happened in 2010 when they let the Bush tax cuts expire," Mr. Beatty added. "I personally went all pre-tax with my contributions because my tax rate went up."
Rob Victor, principal at Foster Victor Wealth Advisors, is a fan of President's Trump's proposal for cutting taxes for those individuals in the lower tax brackets, "which will cause many Americans to see more dollars in their pockets."
Additionally, Mr. Victor supports the president's plan to get rid of the estate tax.
"The combination of these two changes will hopefully allow more Americans the opportunity to save and invest," he added. "These changes will also simplify the ability to pass generational wealth from one family member which will be very impactful for baby boomers and their children."