GOP Pass US Tax Reform Bill For 2013
by Mike Godfrey, Tax-News.com, Washington
07 August, 2012
The United States Republican-led House of Representatives has approved, on party lines, the Pathway to Job Creation Through a Simpler, Fairer Tax Code Bill, which would require the House and the Senate to consider tax reform legislation in 2013 according to an expedited timeline.
The bill, which was passed on a 232-189 vote with every Democrat in the House opposed to it, would expedite procedures for a tax reform bill containing principles included in the last two House-passed budgets: a consolidation of the current individual income tax brackets into not more than two brackets and a top rate of not more than 25%; reduction in the corporate tax rate to not more than 25%; repeal of the Alternative Minimum Tax; broadening of the tax base to maintain revenue between 18% and 19% of gross domestic product (GDP); and change from a worldwide to a territorial system of taxation.
The Chairman of the House Ways and Means Committee would be required, by April 30 next year, to introduce legislation under the following title: A bill to provide for comprehensive tax reform. The chair of the Joint Committee on Taxation would have to notify the House and the Senate that the proposals in the bill followed the above principles.
The present Ways and Means Committee Chairman Dave Camp (R Michigan) said that the bill provides a specific timeline for the House and the Senate to act next year on a comprehensive tax reform bill. "It also ensures an open process," he commented. "A bill is introduced and then the appropriate committees may amend it. Democrats and Republicans alike will have an opportunity to debate and offer changes.
We also dont think we should ask taxpayers to bail out Washingtons wasteful spending, he added. Tax reform should not result in the federal government taking more out of the economy and more out of taxpayer pockets than the tax system historically has. That is why this bill says federal tax revenues should remain within historic norms of 18%-19% of GDP.
Although there has, as yet, been no disclosure by the Republican Party of what tax credits or expenditures would need to be curtailed or abolished, the House Budget Committee Chairman Paul Ryan (R Wisconsin) commented that the US tax code has become an antiquated and complex maze that stifles economic growth and job creation. The tax code is littered with special-interest loopholes that... not only disproportionately benefit the well off, but also narrow the tax base and lead to higher marginal tax rates to make up the lost revenue.
However, subsequently, the While House issued a statement confirming its strong opposition to the Republican bill, on the basis that it would provide for expedited consideration of tax reform legislation only on the condition that it includes additional massive tax cuts for high-income households and corporations.
While it said that the President is strongly in favour of both individual and business tax reform, his opinion is that the tax cuts required (by the bill) carry a price tag of about USD5 trillion over ten years. This revenue shortfall would either explode the deficit or have to be paid for. If the tax cuts were financed with reductions in tax benefits, as proposed in the House-passed Republican Budget Resolution, the result would be a large tax cut for the wealthy paid for by substantial tax increases on middle-class families.
Ways and Means Committee Ranking Member Sander Levin (D - Michigan) reminded the House that the Joint Economic Committee analysis of the Republican proposals "found that the average millionaire would get another USD331,000 in tax cuts, while middle class families making less than USD200,000 would see their taxes go up by an average of USD4,500, because the only way to finance these massive tax cuts for the highest earners is to eliminate or significantly curtail (credits and deductions) that support the middle class.
In addition, he continued, the House Republican plan to lower the corporate rate to 25% would require eliminating every provision that encourages American manufacturing the research and development credit, accelerated depreciation, the manufacturing deduction. And the Joint Committee on Taxation has found that even if you eliminated everything, you could only lower the rate to 28% on a revenue neutral basis.
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