What a difference a few months make. When 2017 began, it seemed all but certain that Republican control of the House, Senate and White House would quickly deliver wide-ranging tax reform, with much lower tax rates as a headline feature. After all, when George W. Bush was elected in 2000, he pushed through big cuts within six months (just before Democrats regained control of the Senate). The only question was: How much would taxpayers save?
Fast-forward to the dog days of summer. With Congress bogged down with health care, tax reform has been starved for oxygen. House Speaker Paul Ryan still promises a new law before year-end, but face it, even if Congress acts late in the year, any big changes are likely to be phased in rather than pay off immediately. That’s what happened the last time true tax reform won the day, in 1986. That legislation called for 15 tax brackets to be compressed into two, for example, but there were still five brackets in 1987 and the two-rate system only lasted for three years after that. Exemptions got a big boost, but in three steps starting the year after enactment.
We still expect Congress to approve both individual and business tax cuts, if not fundamental tax reform, sooner or later. But for the 2017 return you file next spring, you should expect the law to remain pretty much as is. That means any big changes in your tax bill are likely to be a result of changes in your financial life and do-it-yourself moves to trim the tab.