Cut rates, brackets but what about deficit: GOP on taxes
Congressional Republicans are planning a massive overhaul of the nation’s tax system next year, a heavy political lift that could ultimately affect families at every income level and businesses of every size. Their goal is to simplify a complicated tax code that rewards wealthy people with smart accountants, and corporations that can easily shift profits - and jobs - overseas. It won’t be easy. The last time it was done was 30 years ago.
Senate Majority Leader Mitch McConnell, R-Ky, and Speaker Paul Ryan, RWis., have vowed to pass a tax package that would not add to the budget. The Washington term is “revenue neutral.”
It means that for every tax cut there has to be a tax increase, creating winners and losers. Lawmakers would get some leeway if non-partisan congressional analysts project that a tax cut would increase economic growth, raising revenue without increasing taxes.
Nevertheless, passing a massive tax package will require some tough votes, politically. Some key Republican senators want to share the political risk with Democrats. They argue that a tax overhaul must be bipartisan to be fully embraced by the public. They cite President Barack Obama’s health law - which passed in 2010 without any Republican votes - as a major policy initiative that remains divisive.
Congressional Democrats say they are eager to have a say in overhauling the tax code. But McConnell, who faulted Democrats for acting unilaterally on health care, is laying the groundwork to pass a purely partisan bill.
Both McConnell and Ryan said they plan to use a legislative maneuver that would prevent Senate Democrats from using the filibuster to block a tax bill. McConnell says he wants the Senate to tackle a tax plan in the spring, after Congress repeals Obama’s health law. House Republicans are more eager to get started, but haven’t set a timeline.
Some things to know about Republican efforts to overhaul the tax code:
The house plan
House Republicans have released the outline of a tax plan that would lower the top individual income tax rate from 39.6 percent to 33 percent, and reduce the number of tax brackets from seven to three. The gist of the plan is to lower tax rates for just about everyone, and make up the lost revenue by scaling back exemptions, deductions and credits. The plan, however, retains some of the most popular tax breaks, including those for paying a mortgage, going to college, making charitable contributions and having children.
The standard deduction would be increased, giving taxpayers less incentive to itemize their deductions.
The non-partisan Tax Policy Center says the plan would reduce revenues by $3 trillion over the first decade, with most of the savings going to the highest-income households. That’s not revenue neutral. Small business owners would get a special top tax rate of 25 percent. Investment income would be taxed like wages, but investors would only have to pay taxes on half of this income. — AP
WASHINGTON: The exterior of the Internal Revenue Service (IRS) building in Washington. Congressional Republicans are planning a massive overhaul of the nation’s tax system in 2017, a heavy political lift that could ultimately affect families at every income level and businesses of every size. — AP