By William Gale
FORTUNE – On Wednesday, U.S. Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, unveiled an ambitious plan to overhaul America's complicated tax code. This is both a technical and a political feat. The number of changes is immense -- the table of contents listing the provisions runs for eight pages. The number of political enemies created is probably equally immense.
The news that people will want to hear is the proposed cut in tax rates. Officially, income tax rates would fall to 10% and 25%. The alternative minimum tax would be repealed. For corporations, the tax rate would be reduced to 25% from 35%, and the tax treatment of international income would be changed almost all the way to a system that exempts foreign income.
Unlike many previous Republican tax-rate-cutting proposals, Camp's actually specifies how he would finance these changes. This is vital, but it is not pretty. Here's why:
With all of these changes and caveats, the Joint Committee on Taxation scores the proposal as roughly revenue -- and distributionally neutral over 10 years. If this conclusion holds up over time, it is an important one, since the proposals invokes many changes moving in different directions. For example, the personal exemption is eliminated, but the standard deduction is raised. The earned income credit is reduced, but the child credit is increased. The net effect of these changes on low-income households is estimated to be roughly a wash. But it will be important for policymakers and the public to think of these changes as a package. If provisions are cherry-picked, by policymakers or advocates, the proposal can be made to look much more regressive or progressive than it is. Likewise, there are numerous provisions affecting the well-off that the proposal offers as a package.
Interestingly, despite the pro-business aura of the proposal, the proposal would cut individual income taxes and raise revenue collected from business.
The proposal does little to change Obamacare. In fact, it would retain the high-income surtaxes that the Affordable Care Act created, though it does propose to repeal the medical device tax.
While the basic contours of the proposal are clear, there remain a lot of unanswered questions in understanding the potential impact of the proposals, in particular in terms of how the various provisions would interact.
What seems more certain is there will be immense political opposition to the changes proposed. That is the Achilles heel of tax reform proposals that aim to broaden the base and take away people's cherished deductions.
Still, Camp's proposal opens the door for a potential conversation. While it seems extremely unlikely that anything could happen soon on tax reform, it also seemed that way in the 1980s for a long time leading up to the tax reform act of 1986.
The dizzying document is overwhelming, but it doesn't have to be. Here's what to watch for.
By David Wessel
FORTUNE – Next week President Obama is expected to send Congress his new budget. It's a huge, sprawling document; last year's was 2,476 pages in four volumes. Because no one can absorb all that instantly, here's an insider's guide to the budget for fiscal year 2015, which begins Oct. 1, 2014.
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