In Congress’ haste to push tax reform through in late 2017 they unfairly (some say) eliminated the deduction for employee business expenses through 2025. The suspension of this deduction negatively affected taxpayers across many different occupations – first responders, school teachers, military personnel, transportation workers, construction workers and others.
Well, there may be good news on the horizon for these taxpayers. As first reported by Alan Viard of TheHill.com there has been legislation introduced in Congress by Democratic Senator Bob Casey (S.2718) and Democratic Representative Conor Lamb (H.R. 2103) to bring back the employee business expense deduction. This would bring individual tax reform more in line with corporate and small business/self-employed reform that was passed by Congress as part of the Tax Cuts and Jobs Act of 2017 (TCJA).
TCJA did a good job of bringing much needed reform to our corporate tax structure. It did a fair job of reforming the part of the tax code that applies to small businesses and the self-employed. However, it fell short of what was needed for individual tax reform. I use the following analogy to describe the recent effort at tax reform — corporate tax reform was a stand-up triple, small business and self-employed tax reform was a stand-up double and individuals made it to first base, but they got there by being hit by the pitch. Congress had a once in a generation opportunity to make meaningful change to our tax code and they fell short when considering the effect on individuals.
In his article in The Hill, Alan Viard does a good job describing the inequity caused by the elimination of the deduction for employee business expenses. Businesses can rightly deduct the costs associated with generating revenue. Why can individuals no longer do the same thing? As Viard points out, this violates a very fundamental rule of fair tax policy. Fair tax policy should always be applied consistently and in this case it is not. An individual should be able to deduct the costs they incur to earn their wages. (See Viard’s full article at The Hill)
Effective and fair tax reform seemed within reach as Congress worked diligently on TCJA during 2017. The consensus among most experts was that Congress would pass a meaningful, generational reform package in 2018 once their work was completed. However, as often happens, political expediency got in the way of Congress finishing their job.
Congress was successful in effecting much needed and meaningful tax reform for corporate and small businesses with passage of TCJA. They need to finish the job for individual workers. They have another opportunity to correct their mistake and apply consistent and fair tax policy across all classes of taxpayers. It looks like they may be getting started on that effort. DRDA CPA’s will continue to monitor this important piece of legislation and keep you informed of its progress.
You may contact Senator Bob Casey at Senator Casey and Representative Conor Lamb at Rep. Lamb to weigh in on this important pending legislation. You may contact the author, Larry Lonero, E.A, at larry@DRDACPA.com and DRDA CPA’s at (281) 488-2022 or www.DRDACPA.com.