What the current political environment means for CPAs

Elving Blog ImageRon Elving is a senior editor and correspondent for NPR’s Washington Desk. Ron delivered the keynote address at this year’s AICPA Governmental Accounting and Auditing Conference. We sat down with him to get his insights on what’s going on in Washington and how it affects CPAs.

What would you say are some of the legislative and political issues that CPAs should be following? What issues will most affect them?

In the next year, it’s likely that less will change in terms of federal law and regulation than has changed in the past two years. The Tax Cuts and Jobs Act (TCJA) of 2017 was the first big reform in 33 years, and it continues to affect businesses and individuals as regulatory adjustments to its administration continue. Some tax policy may be debated in Congress in 2020, but the next round of real change in tax rules is probably two years away. We should expect that next round to be significant, either by extending TCJA or largely repealing it — depending on who wins the critical races in 2020.

Government spending will be off to the races again in 2020 as all budget caps (and the threat of sequester) from the Budget Control Act of 2011 were removed this month. New debt to finance the federal budget deficit will exceed $1 trillion in each of the next two budget years. There is no end in sight to this reliance on fresh borrowing, and the debt ceiling has been raised as the accumulated debt passed $22 trillion.

What effect will the debate on the taxation of the digital global economy have on the political and economic landscape?

Congress has held hearings on this issue, notably last month. It is a looming issue for the future, but not likely to be salient in the 2020 conversation. Confusion over state laws and over the apparent violations of the Internet Tax Freedom Act of 1997 are bad enough. Efforts to tax digital downloads in other countries — notably in Asia and the EU — are more confusing yet. On the political front, there is great fear and consternation about the power of the big platforms (Google, Facebook and Apple), but there is also a natural reluctance to restrain free enterprise or penalize an innovative and productive industry for its success. Members of Congress are more immediately interested in determining how these platforms might help or hurt their own re-election prospects. But they are getting an earful from constituents in retail and other sectors about the economics of all this as well.

Government tends to be the final frontier on cyber-related changes. The IRS is working with Kennedy-era technology. States and municipalities often need to communicate through systems that don’t “talk to each other.” What is the landscape for cybersecurity that may have trickle-down effects on state and local government today?

Computer modernization is an enormous obstacle for contemporary governance. The funding is often a slow process over multiple sessions of Congress, meaning that software and even hardware that’s approved is superannuated before it’s even been bought. The Air Traffic Control system is an egregious example. Treasury is probably light-years ahead of some other agencies, yet not state of the art. All this is complicated by issues of cybersecurity, in part because the government has so much of our vital data and generates so much of it (Social Security numbers, for example). It is also caught up in the political crossfire over the security of our computer systems vis-a-vis government-sponsored hackers from hostile countries. Even discussing it becomes fraught with these tensions.

We’re not far from a world in which governments may begin accepting cryptocurrency and CPAs might one day be required to work with cryptocurrency or value it in some way. What does the regulatory environment look like for cryptocurrency?

Congress has done little but talk about cryptocurrency. There was a lot of anxiety about Libra earlier this summer in Senate Banking and House Financial Services and Facebook backed off, claiming it welcomed regulation. Since then, congressional committees have also held back because they are concerned about restraining legitimate private enterprise — even as they fret about the effect on conventional banks and other entities with long histories of supporting congressional campaigns. Ultimately, the Fed may need to be the lead actor here in concert with Treasury. Congress would rather play the role of approving or disapproving what these agencies decide to do. Members still tend to see cryptos as more a tool for anti-governmental or extra-governmental actors than for legitimate business or for government itself. But this is still an evolving space and greater acceptance could come rapidly.

If our audience could take away one point from our conversation, what would it be?

It is difficult to overstate the importance of the election of 2020. The campaigns for president, Congress and in the states will be tumultuous. It will be the longest, most intense, most expensive election in our history, and possibly the most divisive since the Civil War. We may see a test for the 230-year tradition of a peaceful transfer of power, and we may hear questions raised about the long-term viability of a 50-state union. Major issues to be discussed include the longtime U.S. leadership in world business and economics, our commitment to free trade as a means of raising world living standards, our immigration principles and practices, our tax and spend policies and our willingness to carry a national debt that exceeds our GDP.

Watch our interview with Ron to hear more about his views on the current political landscape.

Veronica Vera, Senior Manager, Public Affairs, Advocacy & Media — Tax, Association of International Certified Professional Accountants

Source: AICPA