A tax plan from House Ways and Means Committee Chairman Dave Camp would further limit the mortgage-interest break and end the deduction for state and local taxes, according to a nonpartisan congressional summary.
Camp's plan to be unveiled today, the most comprehensive reconstruction of the U.S. tax code since 1986, would reduce individual and corporate tax rates. The corporate rate cut to 25 percent from 35 percent would be phased in over five years.
The summary by the Joint Committee on Taxation is dated Feb. 21. Camp, a 60-year-old Michigan Republican, is scheduled to release the full plan at 1:30 p.m. today in Washington.
"Our code is overly complex, as I like to say, 10 times the size of the Bible with none of the good news," Camp said today on CBS's "This Morning" program. "It's really a wet blanket over our economy."
The proposal probably won't advance far in Congress this year, in part because of a partisan disagreement over whether tax-code changes should raise additional revenue. Senate leaders from both parties yesterday gave the plan little if any chance of becoming law.
"If you wait for the perfect time to put a big idea on the table you'll never put a big idea on the table," Representative Paul Ryan, a Wisconsin Republican who is expected to succeed Camp as committee chairman, said today.
House Republican leaders have been reluctant to discuss and shape details of the plan, and haven't committed to allowing the full House of Representatives to vote on it.
"It's time to have a conversation on tax reform," House Speaker John Boehner, an Ohio Republican, told reporters today. "We all know our tax system is broken."
Camp's proposal will become the benchmark for future efforts to revise U.S. tax policy, giving companies that disagree with specific provisions an incentive to build opposition as quickly and permanently as possible.
The plan would avoid increasing or reducing the budget deficit, and wouldn't reduce the burden on high-income taxpayers. Those constraints required Camp to make tradeoffs that put longstanding tax breaks at risk.
It's not clear from the document which individuals and businesses would pay more taxes. It says Camp's plan would reduce taxes for individuals by $590 billion over the next decade, though that doesn't include revenue from broadening the tax base for businesses that report profits through their owners' individual returns.
Camp's proposal would push more people into Roth-style retirement accounts, raise taxes on private equity managers' carried interest and impose a tax on the assets of the biggest banks and insurers.
The plan would revise a low-income housing tax credit often used by banks, said House Republican aides with knowledge of the proposal. The credit would be altered to generate $10.7 billion in additional revenue over the next decade and encourage more investment in low-income housing, said the aides, who sought anonymity to describe an analysis of the economic effects.
The mortgage proposal would reduce the amount of mortgage debt eligible for the interest deduction to $500,000 from $1 million, according to the document. The state and local tax break, which particularly benefits residents of high-tax states such as New York and New Jersey, would be eliminated.
Individuals would have a two-bracket structure, with a 10 percent rate on the first $74,800 of taxable income for married couples and a 25 percent rate above that. The standard deduction would increase and the personal exemption would be eliminated.
For high earners, the Camp plan contains some new provisions, according to the document. The benefits of the lowest tax bracket and the standard deduction would be lost as their income rises, and very top earners would face a 10 percent surtax above the top rate of 25 percent.
The surtax would apply to annual income of married couples starting at about $450,000 and single taxpayers at about $400,000.
Also, it would apply to a definition of income that is much broader than regular taxable income, including employer-provided health insurance, certain retirement contributions and municipal bond interest. It wouldn't apply to charitable contributions or income from domestic manufacturing.
Camp's plan would alter the taxation of income earned outside the U.S. by multinational corporations, echoing a draft he released in 2011.
It would require immediate taxation at a reduced rate on certain income generated from intangibles such as patents. Companies would also be required to pay a one-time transition tax on accumulated profits from the current system, under which companies can defer U.S. taxation until they repatriate their profits.
The plan also would repeal accelerated depreciation and the individual and corporate alternative minimum taxes, according to the document.
Companies would also have to amortize research and advertising expenses instead of deducting them immediately, according to the document.
The bank tax would affect about 10 companies the largest banks along with non-bank institutions such as General Electric Co.'s financing arm deemed systemically important. A House Republican aide with knowledge of the plan asked for anonymity to describe it.
The bank tax, which would raise $86.4 billion for the U.S. government over the next decade, would likely affect JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley, all of which had more than $500 billion in assets as of Dec. 31, according to the Federal Reserve.
Representative Patrick McHenry, a North Carolina Republican, said he had a "deep concern" with the bank tax, saying it would amount to a tax on lending.
"That is deeply problematic and I'll oppose it," he said.
Representative Dave Reichert, a Washington state Republican on Ways and Means, said he's already hearing from businesses back home that want him to "bend the chairman's ear" about particular tax breaks.
"Take a deep breath, and step back and go through the entire bill," he said. "Take a look at your entire bottom line liability and then make your judgment based on that."