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Camp, Hatch Carry Forward US Tax Reform Debate

by Mike Godfrey, Tax-News.com, Washington

16 December 2014


On December 11, the outgoing Ways and Means Committee Chairman Dave Camp (R – Michigan) officially introduced his draft comprehensive tax reform legislation into the House of Representatives, while Orrin Hatch (R – Utah), Ranking Member of the Senate Finance Committee (and expected to be its next Chairman), published an in-depth analysis, entitled "Comprehensive Tax Reform for 2015 and Beyond."

In the first of the two efforts to carry the United States comprehensive tax reform debt into the next Congress in 2015, Camp's Bill formalizes the tax reform discussion draft he released on February 26, 2014, without modifications. In fact, in an accompanying statement, he hoped that "the formal introduction of this proposal in the House will help spur further action on this critical issue in the 114th Congress."

"At its core, the Tax Reform Act of 2014 is about making the tax code simpler and fairer for hardworking taxpayers," Camp stated. "This legislation does that by ensuring that virtually all taxpayers would pay the least amount of taxes without having to keep track of every receipt and record and live in fear of an IRS audit. This legislation makes the Code more effective and efficient by getting rid of narrowly targeted provisions to lower tax rates across the board."

Using changes to individual and business tax breaks, the Tax Reform Act of 2014 would flatten the individual tax code by reducing rates and collapsing the current brackets into two of 10 percent (encompassing the present 10 percent and 15 percent bands) and 25 percent, "ensuring that over 99 percent of all taxpayers face maximum rates of 25 percent or less."

Around 95 percent of individual filers would get the lowest possible tax rate by simply claiming the standard deduction (with no more need to itemize and track receipts).

In addition, using the reform of a large number of business-related exclusions and deductions, the Act would reduce the maximum corporate tax rate from 35 percent to 25 percent on a gradual basis. It would also transform US international tax rules by replacing the current "worldwide" system with a "quasi-territorial" 95 percent dividend exemption for foreign business income.

On the other hand, Hatch's analysis outlines the issues policymakers will have to confront in the effort to reform the US tax code and "aims to further educate and inform this critical debate."

He indicated that the report "is intended to provide background on where we are and where we have been with regard to our tax system as well as some possible direction on where our reform efforts should go in the near future."

"If we are ever going to make tax reform a reality, both parties will have to come together to get it done," he insisted. "That will mean Republicans and Democrats in both the Congress and the White House working together toward a common goal. … I am willing to work with anyone – Republican or Democrat – to fix our country's tax code and I hope this report will be viewed as an invitation to work together on these critical issues."

TAGS: individuals | tax | business | law | corporation tax | tax credits | legislation | tax rates | United States | tax breaks | tax reform | individual income tax | Tax

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