GOP tax-overhaul plan ready

Proposal pares brackets to 2 for most filers: 10%, 25%

Senate Minority Leader Mitch McConnell said Tuesday that he sees no chance of tax-overhaul legislation passing this year.
Senate Minority Leader Mitch McConnell said Tuesday that he sees no chance of tax-overhaul legislation passing this year.

WASHINGTON - The Republican plan to overhaul and simplify the nation’s tax code is expected to call for a cut in the top corporate income rate, to 25 percent from 35 percent, and a reduction of the seven individual tax brackets to two, at 10 percent and 25 percent, aides familiar with the proposal said.


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The proposal, which is to be released today after nearly three years of behind-the scenes work, is the brainchild of Rep. Dave Camp, R-Mich., the chairman of the Ways and Means Committee, and it reflects the long-held tax overhaul goals of the Republican-passed budget.

Though about 99 percent of individual tax filers would not have a tax rate above 25 percent under the plan, the remaining 1 percent, those whose income is above about $450,000, would be subject to a 10 percent tax surcharge on certain types of income, aides familiar with the plan said.

The surcharge would affect salaried professionals, such as lawyers and accountants, while excluding those whose income comes from production, manufacturing and farming. It would not apply to capital gains or dividends, sparing many of the richest Americans who make the bulk of their money from investments.

The current top tax rate for individuals is 39.6 percent.

The long-awaited plan to overhaul the tax code will be released on the same day that Camp is set to shepherd through the House a bill to stop new Internal Revenue Service regulations on political “social welfare” groups.

Republican leaders were not encouraging Camp to press forward with his tax plan, and the few details already known illustrate why. Camp had promised conservatives that he could reduce the highest individual tax rate to 25 percent - the same rate as his proposed corporate tax rate - but it turned out that such cuts are likely to prove impossible without drastically reducing popular tax breaks, such as the mortgage interest deduction.

The details of how the proposal would offset the tax cuts will be laid out today.

Such intraparty contention was precisely what House Speaker John Boehner of Ohio had hoped to avoid this election year when he shelved a broad immigration push, then whisked through an increase in the debt ceiling, relying almost entirely on Democratic votes.

Few believe that Camp’s proposal has much life this year. But after three years of methodical efforts, Camp has earned the right to try, leadership aides said.

They added that Camp’s “discussion draft” would serve as a test to see what sort of traction he could get with his fellow Republicans. Many in the party favor tax changes in theory but often balk at the trade-offs required.

The issue of whether to increase overall tax revenue is a major sticking point among Republicans and Democrats. Most Republicans in Congress oppose anything that looks like a tax increase, while Democratic leaders insist that any attempt to overhaul the tax code raise additional revenue.

Senate Minority Leader Mitch McConnell, R-Ky., said Tuesday that he sees no hope for enacting tax-overhaul legislation this year, blaming Democrats for trying to use the issue to raise revenue by $1 trillion.

McConnell said the object of overhauling the tax code should be making the nation more competitive, not raising more money for the government.

Democrats already have begun expressing frustration with how the rollout of the tax-code overhaul is being handled. Democratic aides said that unlike their Republican colleagues on the Ways and Means Committee, they had not been briefed on details of the plan or alerted that the draft legislation was to be released today.

As signs of the panel’s partisan approach, Democrats pointed to Camp’s bill on IRS regulations and the fact that the committee has largely been focused in recent months on President Barack Obama’s signature healthcare law.

The last full committee hearing on any topic other than the Patient Protection and Affordable Care Act was last July, they added.

“Tax reform is undermined when you proceed on a partisan basis, but it’s made all the more difficult when you combine it in the same week with this totally political, partisan IRS approach,” said Rep. Sander Levin, D-Mich., the ranking Democrat on the Ways and Means Committee.

“There’s a real contrast here. On the one hand, Dave’s acting as chairman of Ways and Means, putting out a tax-reform bill. On the other hand he acts like chairman of the Republican campaign effort.”

Camp, meanwhile, has been working behind the scenes to shore up support for the tax overhaul with leading businesses and advocacy groups. He spent much of last summer touring the country, holding campaign-style events with Democratic Sen. Max Baucus of Montana, to drum up support.

Camp, however, recently lost his Senate partner when Baucus was confirmed as ambassador to China.

Corporations have been a big backer of a tax overhaul, arguing that the 35 percent tax rate on most corporate income is the highest in the industrialized world. However, few corporations pay the top rate because of provisions in the tax code.

Information for this article was contributed by Ashley Parker of The New York Times and by Stephen Ohlemacher and David Espo of The Associated Press.

Front Section, Pages 1 on 02/26/2014

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