Tax reform: What can you expect next?

Photo of a man learning about tax reform.

What will potential tax reform mean to you? With tax legislation being a hot topic on Capitol Hill, we’re here to help you sort through the rumors to understand what could happen next.

What is tax reform?

Tax reform is legislative action to rewrite the tax code—how the federal government collects money through taxes from people and businesses to pay for government services (such as military defense, Medicare and Social Security, etc).

Tax rules and regulations are updated frequently, but there hasn’t been a thorough overhaul of the tax code since 1986. A tax reform bill is currently being worked on in the House of Representatives as a result of:

  • Campaign promises
  • Party and political interests
  • Expectations that such a bill could successfully pass

How tax reform happens.

Graphic which shows the steps in tax return as, 1. House Committee proposes tax code updates, 2. Updates presented to House as bill, 3. House votes on bill, 4. If passed the Senate votes on the bill, 5. If passed again the President can sign it into law.

Cutting taxes will likely be a big part of tax reform, which reduces revenue that pays for federal programs and services. Tax reform legislation will offer ways to balance cuts and expenses by taking from some areas and giving to others.

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

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