Stillwater CPA Elizabeth Bystrom has been keeping close watch lately on Washington politics and the potential for massive changes to the federal tax code.
At this point, though, she'd tell her clients not to sweat it.
"Watching this proposal come out of Washington has been fun for me," said Bystrom, a certified public accountant whose clients include small business owners and other people who need tax advice. At the same time, she's suggesting they not get too excited or worried about what could happen until it does.
President Trump on Friday promised a "giant, beautiful, massive" tax cut for Americans amid a big push this week for his tax overhaul proposal. He wants to collapse tax brackets, reduce rates, cut itemized deductions and boost the standard deduction. Corporate taxes and the top tax rate would fall, and the tax levied on high-value estates, which Republicans call the death tax, would be eliminated.
Despite those big ideas, Bystrom and other Minnesotans who keep a close eye on tax policy say it's easier said than done. Talking up change is one thing. Writing policy and getting a majority in Congress to back it is quite another.
The Preston Republican says the notion of stripping the tax code of deductions isn't as simple or politically viable as it sounds.
"People say, get rid of these tax expenditures, get rid of these deductions until they're mine. Don't get rid of mine," he said. "And so, you're going to be walking through quite the minefield to try and make this thing work."
The most closely watched deductions involve charitable contributions, interest on mortgage payments and write-downs related to state and local taxes.
That last one is especially key in higher tax states like Minnesota, said Jim Girard, who served as state revenue commissioner under Republican Gov. Arne Carlson.
"The tax deductibility of state and local taxes hits some areas a lot harder than others, and Minnesota would get hit pretty hard," he said.
But Girard said it's too simplistic to stop there. The changes to income tax rates and doubling in the standard deduction could cancel out any blow.
"There's so much interaction right now between pieces that we don't know what the numbers are it's really hard to say what it does," he said.
The standard deduction goes to taxpayers who don't itemize. More than six in 10 Minnesota taxpayers claim the standard deduction, which is just shy of $13,000 for married filers and roughly half that for single filers.
Bystrom, who has been in the tax business for 17 years, said the people she works with tend to do better by itemizing.
"If the standard deduction were to be doubled, then that would sweep a lot more people into the group of people who don't itemize, thereby making filing your income tax return easier from a standpoint of information reporting," she said.
But Bystrom isn't getting her hopes or anyone else's up, until Congress makes some concrete moves. She says history shows sweeping tax changes don't come fast and usually don't come at all.
"It's generally better to stay the course when it comes to tax planning and tax projections based on what we know today," Bystrom said.