Just before recessing for the Independence Day holiday, House Republicans unveiled a tax reform blueprint. Since January, the House Ways and Means Committee has been exploring different approaches to tax reform. House Ways and Means Chair Kevin Brady, R-Texas, outlined six principles for tax reform:
- The tax code must be simpler, fairer, and flatter;
- Loopholes must be closed and special interest provisions eliminated for lower rates for everyone;
- Businesses of all size must have a fair and competitive tax rate;
- The current world-wide tax system must be replaced with a permanent, modern, territorial-type system;
- Reform should be bold, ambitious and pro-growth;
- A 21st century tax system should not raise taxes to bail out Washington’s spending problem.
The GOP blueprint would consolidate the individual tax rates into three brackets (12, 25 and 33 percent). Additionally, the blueprint would repeal the alternative minimum tax (AMT). The blueprint also calls for a simplified return for individuals.
For businesses, the blueprint would lower the top corporate tax rate to 20 percent. The blueprint also would create a new 25 percent business tax rate for small businesses organized as sole proprietorships or pass-through entities. Tax rates on capital gains and dividends also would be reduced.
House Republicans said they will spend the remainder of 2016 developing the blueprint into legislative proposals. While Republicans likely have enough votes to pass the proposals in the House, they lack the 60 votes needed to pass tax legislation in the Senate. Congress will also be on recess during most of August. Democratic lawmakers in both the House and Senate have been cool to the GOP’s tax reform proposals.