Tax Reform Takes Step in Right Direction But More Work Needs to be Done
February 28, 2014
It’s not often that tax reform takes center stage in Washington, D.C, but when House Ways and Means Committee Chairman Camp released his draft legislation on Wednesday, Washington, D.C., and the country, was abuzz. There was so much anticipation that folks started critiquing the plan before it was even released. In the coming days and weeks there will be a lot of scrutinizing, and companies and individuals will run the numbers to see how this affects their bottom line. This proposal is a roller coaster of emotion for fiscal conservatives because there are some very positive developments and there are some not so positive developments. Besides simplifying the tax code with an enhanced standard deduction, there are a handful of positive elements:
- The plan replaces seven brackets of income tax with three and reduces the to rate from 39 percent to 35 percent.
- There would be an increase in the standard deduction from $12,200 to $22,000 for married couples filing jointly. This would allow more than 90 percent of taxpayers to receive the largest reduction with the need of itemizing
- The plan would lower the corporate tax rate fro 35 percent to 25 percent. This would be a huge accomplishment for businesses and the country as a whole (read previous TPA blog postings on the corporate tax here, here, and here).
- Camp’s tax plan would also eliminate the tax exemptions for professional sports leagues like the National Football League (NFL) and the National Hockey League (NHL).
There are some problems with the bill. The most glaring problem is the surtax on families making $450,000 or more. There is also an asset tax of 0.035 percent of financial assets for banks with assets of more than $500 billion. The Camp plan also eliminates some tax deductions and limits others (see a full list from the Tax Foundation here).
Rep. Camp took a bold move by introducing this plan and should be used as a framework for a long-term tax code overall. Instead of trying to pass the whole thing at once, here is a short list of items that Congress should focus on now:
- Replacing the seven brackets with three.
- Increasing the standard deduction. This will make tax filers’ lives much easier.
- Lowering the corporate tax rate. This has been a bi-partisan effort and would mean a huge boost to the economy.
- Eliminating the tax exemptions for the professional sports leagues. There is no way multi-billion industries like the NFL and NHL should be tax exempt.
Tax reform is here and TPA hopes that Congress has the political will to do something this year to lessen the tax burden on all Americans.