Camp Unveils Tax-Reform Plan Amid Dim Prospects

WASHINGTON, DC - JANUARY 08: House Ways and Means Committee Chairman Dave Camp (R-MI) participates in a news conference on the 50th anniversary of the start of the War on Poverty at the U.S. Capitol Visitors Center January 8, 2014 in Washington, DC. The War on Poverty is the unofficial name for legislation first introduced by President Johnson during his State of the Union address on January 8, 1964, which led the United States Congress to pass the Economic Opportunity Act, which established the Office of Economic Opportunity (OEO) to administer the local application of federal funds targeted against poverty. 
National Journal
Billy House
See more stories about...
Billy House
Feb. 25, 2014, 4:30 p.m.

There is no chance of it be­ing ac­ted on this Con­gress, but House Ways and Means Chair­man Dave Camp on Wed­nes­day will un­veil “draft le­gis­la­tion” to over­haul the na­tion’s tax code, pro­pos­ing ma­jor changes for both in­di­vidu­als and busi­nesses.

Camp’s pro­pos­als would lower the cor­por­ate tax rate from 35 per­cent to 25 per­cent, and for top in­di­vidu­al earners from 39.6 per­cent to 25 per­cent. But his plan goes much wider.

It in­cludes a cap on new home mort­gage in­terest de­duc­tions at $500,000, re­peal of the state and loc­al tax de­duc­tion, re­duc­tions in the earned in­come tax cred­it for low-wage earners, and con­ver­sion of cer­tain 401(k) ac­counts to Roth IRA-like ac­counts.

Ac­cord­ing to those with know­ledge of the plan, there would be ba­sic­ally two rates on in­di­vidu­als — down from the cur­rent sev­en brack­ets: 10 per­cent for those be­low roughly $75,000 and 25 per­cent for those above that level of an­nu­al in­come.

A 10 per­cent “sur­tax” would ap­ply to earn­ings above $450,000 for joint filers. And for this pur­pose, the sur­tax would not ap­ply to cer­tain do­mest­ic man­u­fac­tur­ing in­come, but the base would in­clude mu­ni­cip­al bond in­terest and em­ploy­er-provided health in­sur­ance premi­ums.

Also, the stand­ard de­duc­tion and the child tax cred­it would phase out on in­comes above $300,000 on joint re­turns.

There also would be a 40 per­cent ex­clu­sion for cap­it­al gains and di­vidend in­come — mean­ing a max­im­um rate on those cat­egor­ies of 15 per­cent.

Camp’s plan calls for re­peal of the in­di­vidu­al al­tern­at­ive min­im­um tax as well.

On the cor­por­ate side, the re­duc­tion from 35 per­cent to 25 per­cent would be phased in over five years by 2 per­cent a year.

The draft bill would also elim­in­ate the Mod­i­fied Ac­cel­er­ated Cost Re­cov­ery Sys­tem (MACRS is the cur­rent tax de­pre­ci­ation sys­tem in the United States) and lengthen cer­tain lives for new as­sets.

The bill would re­quire amort­iz­a­tion rather than ex­pens­ing of cer­tain re­search and ex­per­i­ment­a­tion ex­penses, and ad­vert­ising ex­penses. For in­stance, ad­vert­ising is now treated as an or­din­ary, fully de­duct­ible busi­ness ex­pense in the year it is in­curred. Camp’s plan calls for al­low­ing busi­nesses to de­duct only 50 per­cent, and re­quires that the bal­ance be amort­ized over some num­ber of years.

Demo­crats on Tues­day had not seen the full plan, but have already been ques­tion­ing how Camp would pay for all of the changes. Some rev­en­ue-raisers are in­cluded. It would re­quire big U.S. banks and in­sur­ance com­pan­ies to pay a quarterly 3.5 basis-point tax on as­sets over $500 bil­lion — rais­ing $86.4 bil­lion over the next dec­ade.

But Demo­crats have char­ac­ter­ized an­oth­er move — the ex­pan­sion of the Roth IRA — as a “gim­mick” that they say could raise a lot of money now but cost a lot of money in the fu­ture.

“We’re go­ing to be re­quest­ing a 20- to 30-year Con­gres­sion­al Budget Of­fice score,” one seni­or Demo­crat­ic aide said late last week.

And even be­fore Camp has un­veiled his tax pack­age — sched­uled to oc­cur at a Cap­it­ol news con­fer­ence at 1:30 p.m. Wed­nes­day — Re­pub­lic­an and Demo­crat­ic lead­ers in the Sen­ate are shoot­ing down the pos­sib­il­ity of get­ting sig­ni­fic­ant le­gis­la­tion through this year.

Both Ma­jor­ity Lead­er Harry Re­id and Minor­ity Lead­er Mitch Mc­Con­nell blamed one an­oth­er Tues­day for hold­ing the le­gis­la­tion up. “The truth is we should have tackled tax re­form years ago,” Re­id said. “It would be ex­tremely dif­fi­cult with the ob­struc­tion we get here from the Re­pub­lic­ans on vir­tu­ally everything.”

What We're Following See More »
STAFF PICKS
After Wikileaks Hack, DNC Staffers Stared Using ‘Snowden-Approved’ App
1 hours ago
WHY WE CARE

The Signal app is fast becoming the new favorite among those who are obsessed with the security and untraceabilty of their messaging. Just ask the Democratic National Committee. Or Edward Snowden. As Vanity Fair reports, before news ever broke that the DNC's servers had been hacked, word went out among the organization that the word "Trump" should never be used in their emails, lest it attract hackers' attention. Not long after, all Trump-related messages, especially disparaging ones, would need to be encrypted via the Snowden-approved Signal.

Source:
WARRING FACTIONS?
Freedom Caucus Members May Bolt the RSC
3 hours ago
WHY WE CARE

The Republican Study Committee may lose several members of the House Freedom Caucus next year, "potentially creating a split between two influential groups of House conservatives." The Freedom Caucus was founded at the inception of the current Congress by members who felt that the conservative RSC had gotten too cozy with leadership, "and its roughly 40 members have long clashed with the RSC over what tactics to use when pushing for conservative legislation." As many as 20 members may not join the RSC for the new Congress next year.

Source:
SOME THERAPIES ALREADY IN TRIALS
FDA Approves Emergency Zika Test
5 hours ago
THE LATEST

"The U.S. Food and Drug Administration on Monday issued emergency authorization for a Zika diagnostics test from Swiss drugmaker Roche, skirting normal approval channels as the regulator moves to fight the disease's spread." Meanwhile, the Wall Street Journal reports that a new study in Nature identifies "about a dozen substances" that could "suppress the pathogen's replication." Some of them are already in clinical trials.

Source:
MONEY HAS BEEN PAID BACK
Medicare Advantage Plans Overcharged Government
6 hours ago
THE DETAILS

According to 37 newly released audits, "some private Medicare plans overcharged the government for the majority of elderly patients they treated." A number of Medicare Advantage plans overstated "the severity of medical conditions like diabetes and depression." The money has since been paid back, though some plans are appealing the federal audits.

Source:
DESPITE CONSERVATIVE OBJECTIONS
Omnibus Spending Bill Likely Getting a Lame-Duck Vote
6 hours ago
WHY WE CARE

"GOP leaders and House Democrats are already laying the groundwork for a short-term continuing resolution" on the budget this fall "that will set up a vote on a catch-all spending bill right before the holidays." As usual, however, the House Freedom Caucus may throw a wrench in Speaker Paul Ryan's gears. The conservative bloc doesn't appear willing to accept any CR that doesn't fund the government into 2017.

Source:
×