How the big, complicated bill could create headaches next tax season

Boston Globe

a day ago

All of that has helped swell the
Get Starting Point
A guide through the most important stories of the morning, delivered Monday through Friday.
Enter Email
Sign Up
Experts said the addition of numerous temporary
tax breaks provides new ways for people to try to game the system while making it more difficult for everyday Americans to file their returns.
Advertisement
'It most certainly doesn't simplify anything,' said Adam N. Michel, director of tax policy studies at the libertarian Cato Institute think tank. 'It definitely makes the tax code significantly more complex, which doesn't just make it challenging for taxpayers to comply with the tax law, but also opens up new avenues for tax avoidance.'
Advertisement
For decades, Republicans have pushed to simplify the increasingly complicated tax code by eliminating or restricting targeted deductions and credits. They have argued that the savings could then be used to help lower the overall rates while making tax-filing less time-consuming.
The Tax Reform Act of 1986 took that approach, in part by eliminating the deductibility of interest on auto and other personal loans. And the 2017 tax law did something similar, restricting the state and local tax deduction and allowing millions of Americans to avoid complicated itemizing by nearly doubling the standard deduction, to $12,000 for single filers and $24,000 for married couples, and tying it to inflation.
The new Republican tax bill, whose main focus is to extend the expiring tax cuts to avoid across-the-board tax increases next year, makes the higher standard deduction permanent and temporarily boosts it by $1,000 for single filers and $2,000 for married couples through 2028. That alone helps further simplify the tax code, said Representative Jason Smith, a Missouri Republican who chairs the tax-writing House Ways and Means Committee.
'The increase in the standard deduction means less people itemizing,' Smith, a key player on the tax bill, told the Globe. 'So we're making it easier for more people to just do the standard deduction.'
White House spokesperson Harrison Fields said critics were missing the bigger picture.
'Leave it to these so-called experts that are politically opposed to anything the president does to overexaggerate and hyperfocus on so-called complications to the tax structure instead of focusing on the real story which is the massive tax cuts brought forward in this bill,' he said. 'Further deductions are music to the American taxpayers' ears, and this bill will result in more money in American families' pockets.'
Advertisement
But the new tax bill, which is being considered in the Senate after
Exempting taxes on tips, overtime pay, and Social Security benefits through 2028
will require complex new rules. For example, the Internal Revenue Service will have to determine what occupations are eligible to prevent abuse of the new break. The bill also restores, with several restrictions, the deduction for auto loan interest through 2028, another 2024 Trump campaign promise, that was axed in the name of simplification in the 1986 law. And the legislation raises the cap on the state and local tax deduction to $40,000 from the $10,000 limit put in place in the 2017 law.
Representative Don Beyer, a Virginia Democrat on the House Ways and Means Committee, said the 2017 tax simplification efforts were spearheaded by the panel's Republican chair at the time, Kevin Brady of Texas, who has since retired.
'I've not heard that phrase used this year,' Beyer said. He argued that making the tax code more complicated will drive more business to professional tax preparers and aligns with Republican opposition to the
Direct File has proven popular, with
Advertisement
'Simplification does not help out billionaires, and this bill is designed to help billionaires,' said Senator Elizabeth Warren, a Massachusetts Democrat. 'Billionaires have very complex financial arrangements, and they can slip through carefully lawyered loopholes.'
'Each one entails fiscal costs, adds complexity, opens new avenues for tax avoidance, and delivers little in the way of long-term growth,' he wrote in a May 14 Cato blog post titled,
He's not the only critic of the bill's added complexity.
'It gets an F for tax simplification, base-broadening, and personal rate schedule. It also adds dozens of narrow, special-interest provisions, which is the opposite of what tax reform should do,' Veronique de Rugy, a senior research fellow at George Mason University's Mercatus Center, wrote in
William McBride, chief economist at the Tax Foundation, a nonpartisan, center-right think tank, said simplification 'just wasn't a priority this time around,' particularly because House Republicans have a much smaller majority than they did in 2017. The bill eliminates some clean energy tax credits put in place during the Biden administration, but those were axed for political reasons, not to increase simplicity, he said.
'You might say 2017 was really the aberration and we're returning to a more normal situation in which you've just got political horse trading and all the the oddball policies that creep in in the middle of the night to satisfy this or that member,' he said. The increase in the state and local tax deduction, for example, was inserted to win the crucial votes of several moderate Republicans from competitive districts in high-tax New York and New Jersey.
Advertisement
Representative Tom McClintock, a conservative California Republican, acknowledged the need to limit Republican defections with unified Democratic opposition
and fulfill Trump's campaign promises made the tax bill more complicated than he would have preferred.
'I think the ideal approach is a broad-based flat tax,' McClintock said. 'But as [Winston] Churchill once said, 'Democracy is the occasional necessity of deferring to the opinions of others.''
Jim Puzzanghera can be reached at