|Even GOP leaders say tax overhaul not likely in 2014||| Print ||
|Written by STEPHEN OHLEMACHER, Associated Press|
|Wednesday, 26 February 2014 17:28|
WASHINGTON (AP) — A sweeping House Republican plan to overhaul the nation's tax laws would wipe out a slew of popular tax breaks to help pay for lower overall tax rates, a politically risky move in an election year that drew quick opposition Wednesday.
The plan would repeal deductions for state and local taxes, medical expenses and moving expenses. Tax credits for child care, adoption services and energy-efficient upgrades to homes would be gone. The mortgage interest deduction would be reduced for people buying houses costing more than $500,000.
In exchange, income tax rates would be cut and the standard deduction, which is used by most taxpayers, would be nearly doubled. The child tax credit would be increased and a complicated series of tax breaks for education expenses would be consolidated and simplified.
The plan borrows ideas from President Barack Obama and other Democrats. But here's a reality check: It has almost no chance of becoming law this year. Even House Speaker John Boehner, R-Ohio, distanced himself from the details Wednesday.
Still, it could become an important political document as congressional elections approach in November. Should Republicans embrace the plan, they could use it to highlight their efforts to simplify tax laws and spur economic growth.
"We need to be the party of growth, opportunity, restoring the American dream. And I think this is something Americans have hungered for," said the plan's author, Rep. Dave Camp, R-Mich., chairman of the tax-writing House Ways and Means Committee. "Look, we have an obligation to debate the big issues of the day."
Democrats quickly revealed their election-year strategy, pointing out cherished tax breaks that would be cut.
"Any proposal that eliminates the deduction for state and local taxes, as the Republican plan would do, is dead on arrival," said Sen. Chuck Schumer, D-N.Y.
Boehner, already wary of some of the unpleasant details, would not promise a vote in the House this year. When asked about the details, Boehner said: "Blah, blah, blah, blah. Listen, there's a conversation that needs to begin. This is the beginning of the conversation."
When asked whether the Republican Party stood behind the plan, Boehner said, "You're getting a little bit ahead of yourself."
The White House was more upbeat. Spokesman Josh Earnest said there are "a couple of aspects of congressman Camp's proposal that are encouraging."
Under the plan, investment managers, big banks and owners of corporate jets would get hit with new or higher taxes, billions would be set aside for public works projects, and some wealthy business partners would no longer be able to avoid Medicare taxes.
Those are ideas championed by Obama, who would direct the new revenue toward more government spending. Republicans, meanwhile, would use it to lower income tax rates for most families and corporations.
The top income tax rate would drop from 39.6 percent to 25 percent, but the plan would impose a new 10 percent surtax on some earned income above about $450,000. The top corporate income tax rate would fall from 35 percent to 25 percent.
The plan would increase the standard deduction from $12,400 to $22,000 for married couples, essentially exempting families that make less from paying federal income taxes. The child tax credit would be increased from $1,000 to $1,500.
The plan is designed to encourage more taxpayers to take the simpler standard deduction rather than itemizing. As a result, 95 percent of filers would take the standard deduction rather than itemize, according to analysis by the nonpartisan Joint Committee on Taxation. Currently, about one-third of filers itemize their deductions.
It would mark the first overhaul of the tax code since 1986.
"This is a comprehensive plan that reflects input and ideas championed by Congress, the administration and, most importantly, the American people," Camp said. "In other words, it recognizes that everyone is a part of this effort and can benefit when we have a code that is simpler and fairer."
The plan is designed to raise about the same amount of tax revenue as the current system, though the overhauled system would be much simpler. It also is designed so that different income groups continue to pay about the same as they do today. Individual taxpayers could see big changes, depending on their circumstances.
Taxes on investments would be cut. But, Camp said, a generous tax break enjoyed by investment managers, known as "carried interest," would be eliminated. Huge banks with more than $500 billion in assets would be hit with a fee. Corporate jet owners would have to wait longer to write off the cost of buying them.
Camp said the plan would eliminate a provision that allows wealthy entrepreneurs and other professionals to avoid Medicare payroll taxes by setting up corporations and accepting the bulk of their compensation as business income instead of wages.
The plan would shore up the cash-strapped Highway Trust Fund by dedicating $126.5 billion in corporate tax revenue to the fund over the next eight years. The fund, which pays for infrastructure improvements, faces annual shortfalls.
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