What to Expect in 2009
by Byrne Hobart
Online and off, there’s a lot of hope and fear about the next year. Will we see our tax system revamped with new tax breaks and incentives that make things easier for the middle class? Will new social programs make the existing tax burden much heavier?
Predicting policy is notoriously tricky, but here are a few best guesses:
- How much will the tax code change? Less than you’d think. When politicians run for office or pose for the camera, they have every incentive to exaggerate their plans and abilities. Once it’s actually time to come up with a law, though, those exaggerated claims bump into each other and lead to some long, drawn-out compromises. Usually, these compromises are solved with a little pork-barrel spending — the difference between a giant spending bill passing or failing might be an expenditure of a few million taxpayer dollars in a strategically important district. So the political process, and the eventual result, won’t change fast enough for taxpayers to see a huge difference on their next return.
- But what about..? There are lots of big ideas floating around, but often those get dissolved into lukewarm compromises. So what kinds of changes will be big news? It’s impossible to say! The tax changes that make the biggest impact are the ones that either a) open up new loopholes, or b) completely change how people behave in certain circumstances. But if someone can spot a loophole or a weird incentive, it’s probably not going to end up in the final tax plan (would anyone have supported the mortgage tax break knowing what it would do to the housing market?).
- Which party will take the lead? Given their smashing victories at basically every level in 2008, Democrats have gotten all of the attention (no, not just for innovative fundraising techniques). But whenever you’re looking at one party, the other party is scheming twice as hard to end up in the spotlight. As the tax debates open in 2009, expect Democrats to moderate their rhetoric — while Republicans come out with some big surprises.