House Republicans are seeking to overhaul and simplify the national tax code with a proposal that calls for a cut in the top corporate income tax rate and a reduction of seven individual brackets to just two.
The plan was devised by Michigan Republican Rep. Dave Camp, who heads the House Ways and Means Committee, and will be released on Wednesday after three years of work, The New York Times reports
Camp's plan calls for cutting the top corporate income tax rate from 35 percent to 25 percent while taxing the two individual tax brackets at rates of 10 percent and 25 percent, and reflects overhaul goals spelled out in the Republican-backed budget.
The plan would mean that 99 percent of individual tax filers would not have tax rates higher than 25 percent. The remaining 1 percent, with incomes higher than $450,000, could face a 10 percent tax surcharge on some kinds of income.
Salaried professionals like lawyers and accountants could face the surcharge, while people whose income is from production, manufacturing, and farming would not, a source told The Times.
Currently, the top tax rate is 39.6 percent.
While Camp had promised he could reduce the highest tax rates to 25 percent, the cuts are not likely unless some tax breaks, such as on mortgage interest, are reduced.
An analysis by the Congressional Joint Committee on Taxation does not show which of the many breaks in the current tax code would be canceled to cut the tax rates, The Washington Post reports
House sources said the tax "discussion draft" could test reaction from Republicans who often favor tax changes in theory but don't support the compromises they entail. Further, they may hesitate to act on the bill only to send it to the Democrat-controlled Senate, which likely would not approve it.
The release of the long-awaited plan to overhaul the tax code will come on the same day Camp is set to shepherd through the House a bill to stop new Internal Revenue Service regulations on political "social welfare" groups, and some Republicans are concerned that pursuing both items could be risky.
Democrats are complaining that they have not been briefed on the plan and did not receive a letter that went out last week to Republicans to alert them of the plan to release the legislation.
Democrats are also saying the IRS legislation adds an even more partisan tilt to the tax reform legislation.
"Tax reform is undermined when you proceed on a partisan basis, but it’s made all the more difficult when you combine it in the same week with this totally political, partisan IRS approach," said Rep. Sandy Levin of Michigan, ranking Democrat on the Ways and Means Committee.
"There’s a real contrast here," Levin said. "On the one hand, Dave’s acting as chairman of Ways and Means, putting out a tax reform bill. On the other hand, he acts like chairman of the Republican campaign effort."
The White House is also not showing much interest in a tax overhaul, reports The Post. Cutting the corporate tax rate from 35 percent remains a priority of the Obama administration, but a total reform effort has been dismissed.
The administration says it will be impossible to lower the top tax rates while protecting the middle class and still raise cash to lower the nation's budget deficits.
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