Tax Guide: Moves You Need to Make

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rom 1975 through 1993, Congress passed 11 major tax laws. That's more than one every two years. The statutes themselves -- without counting the committee reports, regulations, and rulings that explain and implement them -- consumed 3,927 pages of printed text. Five laws were enacted by Democratic presidents and six by Republican presidents. Four were the products of a Congress in which Republicans controlled the Senate while Democrats controlled the House of Representatives.

Important!

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In 1996, Congress passed several more bills containing tax provisions. None of the bills could be described as major tax legislation, but the resulting laws do add to the bulk and complexity of the tax law (and have some noteworthy effects on individuals).

With so much bipartisan attention to the tax system over so long a period of time, we might have expected as a result something approaching perfection. This has not happened. No one in political life would undertake to defend the current tax system. Unfortunately, any agreement on the subject of taxes ends with a shared recognition that the status quo is unacceptable. The litany of complaints about the current system, and therefore about the Internal Revenue Service, is endless. Proposals for change are never-ending. Only agreement over future directions is in short supply.

he most basic tax policy questions are the subject of serious disagreement. Should taxes be cut? If so, by how much? Are taxes on the wealthiest Americans too high or too low? Should income from savings and investment be taxed? Should the tax system be used to encourage charitable giving, home purchases, or a move off of welfare? Various current proposals for tax reform demonstrate that there is no consensus on how to answer the oft-asked questions.

Once again, the reader of this book must approach the task of tax planning in an environment infected with uncertainty. Presidential and Congressional candidates discussed the need for family tax credits, capital gains relief, and educational incentives, as well as more fundamental changes.

Yet, as taxpayers, we remember that the task of balancing the federal budget while dealing with Social Security and Medicare is not easy. In 1995, dreams of tax reform and tax cuts evaporated in the heat generated by the larger budget debate. This year, in 1996, the eyes of politicians have been on the Presidential race, and the politicians consequently have devoted little time or attention to the policy debates, strategizing, or horsetrading that might have produced major tax legislation.

e know that change in the tax system is inevitable and nearly constant, but that sudden substantial shifts are more rare. Thus, we return to advice we offered in earlier years. Put most of your time, energy, and attention into winning with the rules that are in place today. Some of the rules will change, but most will not. Before you wait to realize a capital gain or make an investment because of some promised future benefit, think about the possible costs of waiting and about the real possibility that promised benefits never will become law.

The information that follows, concerning the concrete realities we have to deal with before next April 15, should help you plan some tax-saving moves for this year and the future.

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