The Republican chairman of the tax-writing House Ways and Means Committee unveiled a bold but politically hazardous overhaul of the nation’s tax laws Wednesday that would jettison hundreds of popular tax breaks in favor of a simpler code with lower rates.
The proposal drafted by Rep. Dave Camp (R-Mich.) would significantly reduce rates for individuals and corporations, pushing the top corporate rate down to 25 percent from 35 percent and the top individual rate down to 35 percent from 39.6 percent.
Tax-filing season would also be much easier for most households, with 95 percent of filers likely to claim a new expanded standard deduction and call it a day.
However, all that simplicity comes at the cost of hundreds of credits and deductions that have been woven into the American way of life. There would be no more personal exemptions for you, your spouse and your dependents; no more credit for child care; no more deductions for medical bills or for state and local taxes.
The mortgage interest deduction would be available only for mortgages worth less than $500,000, instead of the current $1 million (though currently held mortgages would be grandfathered). And an important tax break for the poor would be dramatically scaled back.
Investment income would lose its special status and be taxed like regular income. And the wealthiest households — those earning more than $450,000 a year — would lose virtually every deduction and credit, including the tax-free treatment of health insurance premiums paid by their employers.
I haven't read enough on this bill to form a definitive opinion, but my first impression is one of pleasant surprise. It's not exactly a state secret that the Republicans in Congress, especially the House, have been a bitter disappointment to me. But this bill sounds like it could be a really big step in the right direction. Assuming there isn't something horrid buried in it that I haven't found out about yet, I hope the bill gets some serious debate. And maybe (dare I hope?) some constructive input and support from Democrats. There's quite a bit in here that should appeal to their anti-1% constituents.
Trumpism is not a philosophy or a movement. It's a cult.
Based on what I see so far, this deserves serious debate. I think the 40% capital gains reduction is a bit bogus, and I'm curious as to what they are going to do with SS taxation and FICA/Medicare taxes, and what other deductions will stay/go, but it's got a good chassis from what I can tell.
Nice work, congress. This is how you get things done.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
* Are 401k contributions deducted from taxable income?
* Are employer-paid health insurance premiums deducted from income?
These are good questions. I think both sides agree that you need to simplify things. They problem lies in that one man's "simpler version" is another man's deduction.
Tyler wrote:
However, simplifying the tax code reduces the opportunities for graft and political favoritism. Which is why it never happens.
Absolutely correct. The idea of 535 politicians coming together to simplify the tax code strikes me as kind of silly. My expectation would be that the end result would be a bigger monstrosity than we had to start with.
I don't know about everybody else but my own desire for a simplified tax code has lessened in the past couple of years as Turbo Tax has been importing more and more of my data and doing the work for me. There is still a ways to go with this as I just had to correct one of the imported forms to avoid paying an addition $5k but it's getting there.
Tyler wrote:
However, simplifying the tax code reduces the opportunities for graft and political favoritism.
OTOH, it will provide a clean slate for new rounds of graft and favoritism.
Exactly. Resetting the rules could give them a whole new round of bargaining power on changes.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
This must be about the 15th time I've seen virtually this exact same proposal, since Reagan first tried this in the early 1980s. It clearly screws people in blue states (high state/local taxes, high home prices) in favor of red states, which is the actual purpose of the thing. It'll never pass.
What I'd really like to see is the Fair Tax. Maybe the Republicans should focus on this instead of on their usual near obsession with their social/religious agenda.
This must be about the 15th time I've seen virtually this exact same proposal, since Reagan first tried this in the early 1980s. It clearly screws people in blue states (high state/local taxes, high home prices) in favor of red states, which is the actual purpose of the thing. It'll never pass.
The problem is that any kind of change screws someone. Let's not lose sight of the fact that a lot of people are screwed with the status quo.
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan
