The late decision by Congress to extend the Bush tax cuts is creating some unexpected complications.
Since Congress didn't pass the extension until December 17th, the IRS has not had enough time get the necessary systems ready. That means that if you one of the 50 million taxpayers who itemize, you can't file until mid-to-late-February because that's how long it will take Uncle Sam to reprogram its processing systems.
If any good comes of this latest fiasco, it might be a renewed push for tax reform. I decided to speak with Deputy Whip Kevin Brady (R-TX), the new Vice Chairman of the Joint Economic Committee and Chairman of the Ways and Means Subcommittee on Trade on the realities of tax reform.
KB: We need to make sure our economy is the strongest in the world through the 21st century. I think every one of our tax policies, trade policies and regulation policies should all be viewed through that goal.
We need to ask ourselves, what do we need to do to make sure we are the strongest economy? We are falling behind on tax and trade. We need to have a more competitive tax structure, especially on the international level where we are falling behind significantly and becoming uncompetitive.
Secondly I think there are a lot of people in America not just businesses but average Americans who are open to a far more simpler, flatter, tax, than there has been in the past. From a trade standpoint, we have to get back on the field.
We need to aggressively do that because other countries have moved very aggressively on their part to move ahead and cut us out of their customers and taking away our market share. So tax and trade in the Ways and Means Committee will be key in our efforts to strengthen our economy.
You simply can't tax your way back to a balance budget and you can't sustain a federal government this size. 24 percent of our economy is just too large. So you are going to see, if people want it or not, a focus on tax levels and tax reform over the next two years because we have to. Its inescapable.
LL: Most businessmen I speak with tell me when it comes to a flat tax system they say just tell me what percent to pay and they will. Just give me "the number". What number would put U.S. companies on an even keel with the rest of the world?
KB: I don't know but its unacceptable to move from nine points better with our OECD competitors to I think six points behind and now we have the highest corporate tax levels. It is unacceptable.
I think it should also go to the average level as well. We need to create a business environment that values a low corporate rate. I think we need to zero out capital gains. We need to become the best company in the world to invest. I don't know that number exactly but all of us on Ways and Means are starting that discussion on where we should end up.
LL: The President said last year he would like to tackle tax reform. Do you think he will sit down with House Republicans on this issue?
KB: I would love him to, but I doubt he will at least anytime soon. I think right now he is pointing toward the Presidential Election as we speak.
I think he is going to carefully pick the areas he want to work with Republicans on so I think we will get a lot of rhetoric on tax reform. Unfortunately I don't see that substance coming forward.
Dave Camp, the new Chairman of the Ways and Means committee is serious about putting together a package. Timeliness haven't been set and the parameters of that discussion haven't been set but the Chairman is making that a top priority.
LL: Congress was late passing the Bush Tax Cuts extension and we are now facing a big mess with taxpayers having to wait to send in their itemized deductions because the IRS is still in the process of producing the paperwork.
This is a really big problem. Can you explain to my readers more in depth what kind of problems this has created?
KB: It has created a big mess. Both from a business and family uncertainty standpoint. The estimates are a third of the tax returns won't be available or fully completed till the April 15th deadline.
I actually think we ought to move back that April 15th deadline to get people a full exposure to the full time to do their taxes correctly. This can't happen again. We have known for years as a country what the expiration dates were. They should have been acted on well ahead of that. And we are hopeful as Republicans to move those extensions farther than the deadline.
LL: What is the next step in pushing back the April 15th deadline?
KB: It will have to come from Congress but given the lateness and the confusion this is causing I think there could be support on Capitol Hill to do push back the deadline but it hasn't been fully vetted yet by either party.
LL: Does this rank up with the big AMT debacle or is it worse?
KB: You know, good question. I think it will be worse frankly. We'll know more in the next month or so as people start to dig down on their taxes. For the larger companies they have the assets and resources to do it. Smaller businesses are the ones calling us up on these last minute changes and additions and subtractions. They are the ones who are going to pay the price on this.
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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."
