Irony alert: IRS scandal puts tax reform on hold

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.
While bitter feelings already exist across party lines, Ann L. Combs, principal and head of government relations at The Vanguard Group Inc., said she believes the scandal surrounding the IRS’ treatment of Tea Party affiliates will only serve to sharpen that divide.
“The IRS situation that’s unfolding now will make tax reform harder,” she told an audience at InvestmentNews’ Retirement Income Summit in Chicago. “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 believes that some progress will be made in getting legislators to commit to the intention of tax reform. Actual changes, however, are some time off.
As recently as earlier this month, there was some optimism that with Ways and Means chairman Dave Camp, R-Mich., and Senate Finance Committee chairman Max Baucus, D-Mont., would commit to a bipartisan overhaul of the tax code.
But with apparently little action or effort to move forward, those hopes were already dimming before the scandal erupted. Now, all bets are off.
“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: Tax reform can only happen in coordination with the legislative and executive branches, and Democrats and Republicans.