The much-anticipated GOP tax reform blueprint, made available for release at 12:01 a.m. on June 24, offers a dramatic overhaul and simplification of the U.S. tax code, according to a senior House Republican leadership aide. The 35-page document, “A Better Way—Our Vision for a Confident America,” details Republican ideas for implementing a simplified tax code designed for economic growth. The document notes that its unveiling coincides with the 30th anniversary in October of the landmark Tax Reform Act of 1986 (P.L. 99-514), signed into law by President Reagan.
The blueprint states the revenue neutral ideas it contains will be ready for legislative action in 2017. When asked by Wolters Kluwer on June 23 if any provisions in the blueprint would make it to legislative text in 2016, however, a senior House Republican leadership aide stated, “[W]e are not precluding action on any specific items.” The initial goal, however, “from a political, 30,000-foot view, is to make the case to the American people about why our ideas our best for governing.”
The blueprint would create a new 25-percent business tax rate for small businesses that are organized as sole proprietorships or pass-through entities. “Small business income will no longer be subject to the top individual tax rate,” the blueprint noted.
Additionally, the blueprint would repeal the Alternative Minimum Tax (AMT). “The AMT is particularly burdensome for small business owners, who often do not know whether they will be affected by the AMT until they file their tax returns and therefore must maintain a reserve for potential AMT liability – funds not being used to create jobs or grow their businesses,” according to the blueprint.
The proposal that addresses reform within the personal income tax system would reduce the current seven-tiered tax rate structure that ranges from 10 to 39.6 percent to a lower and streamlined three tax brackets, 12, 25 and 33 percent, a senior House Republican leadership aide emphasized on background. A larger standard deduction and child and dependent tax credit would also be implemented.
The blueprint also would lower the corporate tax rate from “the highest in industrialized world,” down to 20 percent. This lowered rate, in combination with moving to a territorial system, “eliminates the incentive for inversion,” a senior House Republican leadership aide said, speaking on background.
In addition, the corporate AMT would be repealed entirely, according to the blueprint. Further, the double taxation of corporate income will be reduced through the reduction of the tax on both dividends and capital gains of individual shareholders.
“Moving to a consumption tax allows us to assert taxing jurisdiction on a destination basis instead of an origin basis, which levels the playing field for domestic production – it makes the transfer pricing and base erosion controversy go away,” the aide said.
Under the GOP proposal, the IRS would be downsized and restructured into three units: individual/families, all businesses and an independent small claims court. Moreover, the blueprint asserts that tax filing will be made easier under a simplified tax code, stating most Americans will only need to fill out a form no bigger than a postcard.
The House Ways and Means Committee will spend the second half of 2016 transforming the blueprint into legislation, according to the aide. “Americans have made it clear that they want us to deliver bold, pro-growth tax reform that will improve lives and increase opportunity,” Chairman Kevin Brady, R-Tex., told Wolters Kluwer on June 23. “Our Blueprint will deliver a tax code built for growth – the growth of jobs, the growth of paychecks and the growth of our economy.”
Responding to the blueprint’s proposals, Rep. Lloyd Doggett, D-Tex., a senior Ways and Means member, said in a press release, “Corporate tax giveaway proposals from Republicans have become as common as their avoidance of gun safety. The only way this plan adds up is by borrowing endless amounts of money from abroad. To be revenue neutral, lowering the corporate tax rate to even 28 percent would require elimination of every corporate tax credit and deduction. Like the Republican refusal to discourage tax dodging by corporations that renounce their citizenship and adopt a foreign address, this proposal slants the marketplace against those who make it in America in favor of those who take from America, moving profits and jobs overseas.”
By Jessica Jeane, Wolters Kluwer News Staff