Tax Code Reform is a Lost Cause for 2012

Washington's policymakers will be focusing on re-election, not tax legislation, for the rest of the year.

If the election were held today and only one yardstick were used to pick the next U.S. president -- tax policies favorable to business -- then Mitt Romney would be elected in a landslide, at least if you polled a group of corporate tax executives, as law firm Miller & Chevalier did recently. The poll, which was conducted when the Republican field still had four candidates (Newt Gingrich, Ron Paul, Romney and Rick Santorum), asked which candidate for president would have the most favorable tax policy for business income. Two-thirds (67%) of the respondents chose Romney, with Gingrich a distant second (13%). President Obama received only 6% of the vote. Presumably, with the campaign now essentially a two-person contest, Romney's score would be closer to 90%, if not higher.

The reverse is also true: When asked which candidate would have the least favorable tax policy, President Obama captured 85% of the responses, with Romney accounting for only 2%.

The results reflect not so much a ringing endorsement of Gov. Romney as they do a frustration at how slowly Washington's policymakers are progressing toward any kind of meaningful tax legislation. Nearly a third (30%) of all respondents say they expect no significant tax legislation to be passed in 2012. Even more telling, absolutely nobody (0%) says they expect to see fundamental reform of the tax code this year (see "By the Numbers").

"Expectations for tax legislation are low for the remainder of the year. Respondents see the pending presidential and congressional elections, coupled with the split in congressional control, as likely putting a significant damper on the tax legislative agenda for the remainder of 2012," says Marc Gerson, a member of Miller & Chevalier and a former majority tax counsel to the U.S. House of Representatives Committee on Ways & Means.

Taxing Your Patience
Miller & Chevalier asked 180 tax directors and other senior corporate executives: What tax legislation do you expect to be enacted into law in 2012? This being an election year, most expect to see only the usual extensions; not one single respondent expects to see the tax code reformed in 2012.

Extension of payroll tax relief legislation -- 61%
Traditional "extenders" package -- 49%
Extension of the AMT patch -- 39%
No significant tax legislation -- 30%
Extension of the 2001/2003 tax cuts -- 19%
Economic stimulus legislation -- 11%
Energy and climate-related tax legislation -- 3%
Fundamental reform of the tax code -- 0%

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