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 The alternative minimum tax would be repealed.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.
Corporate America needs to step up and pay its fair share, instead of using shareholder value as an excuse to dodge taxes.
FORTUNE -- At first glance, you would think that the CEOs of taxophobic U.S. corporations and our less-than-stellar leaders in Washington have nothing in common. But you'd be wrong. What they share is a lack of shame and an excess of narrow thinking.
The similarity between C-suite tax avoiders and MOREAllan Sloan, senior editor-at-large - Oct 30, 2013 5:00 AM ET
Oracle, Google, and Amazon are just a few of the hundreds of large companies that have cut confidential deals with the IRS to help lower their tax bills, and critics want the agency to disclose the details of these complex pacts.
By Lynnley Browning
FORTUNE -- When Oracle reported its latest quarterly earnings last month, most investors focused on the fact that its dividend doubled. The number that got less notice MOREJul 22, 2013 5:00 AM ET
Tax writers have announced a "blank slate" approach to the tax code overhaul.
By Tory Newmyer, writer
FORTUNE -- Corporate tax lobbyists should cancel any vacations they planned to take next month. That's the upshot of a letter the Senate's two leading tax writers sent their colleagues today to put them on notice that their overhaul of the code is starting from scratch. In other words, every corporate carve-out -- for MOREJun 27, 2013 12:52 PM ET
More energy companies are converting to a tax-free status that was once reserved for a small segment of the industry.
FORTUNE -- More and more of the companies benefiting from new technologies that are fueling America's recent energy boom are paying little or no taxes.
In early May, Emerge Energy Services sold $127 million in shares in an initial public offering. Emerge (EMES) supplies sand to oil and gas drillers for blasting MOREStephen Gandel, senior editor - May 28, 2013 9:19 AM ET
Tax avoidance works beautifully -- and legally -- for Apple and other multinationals. Why not make it work for you?
FORTUNE -- It's faddish -- and fun -- these days to talk about the income taxes that Apple does or doesn't pay. Hey, as we learned this week from a Senate report and hearings, Apple's tax strategems are even slicker than its products are. Many of them involve the "intellectual property" MOREAllan Sloan, senior editor-at-large - May 23, 2013 5:00 AM ET
Businesses organized as partnerships account for 35% of all sales. So why are we taxing them at higher rates than other corporations?
By Stephen Chipman and Doreen Griffith
FORTUNE -- The top concern for certain business entities seeking to compete on a level playing field through tax reform has not yet been addressed.
Ways and Means Chairman Dave Camp has released a tax reform discussion draft that would simplify the tax rules for MOREMay 14, 2013 12:44 PM ET
A lower corporate tax rate won't deter companies from playing tax and accounting games. Just look at Apple's math.
FORTUNE -- There's a widely shared idea that if the U.S. reduced its corporate income tax rate to 25% from the current 35%, big corporations would stop playing tax games. They would then pour all their attention into profit-making rather than allocating a ton of talent to tax avoidance, and we would MOREAllan Sloan, senior editor-at-large - Apr 26, 2013 5:00 AM ET
As Democratic Senator Max Baucus plans to step down, his party's leaders want to push him to meet them in the middle on corporate tax reform.
By Tory Newmyer, writer
FORTUNE -- With the news Tuesday that Senator Max Baucus, chairman of the tax-writing Finance Committee, will not seek a seventh term in 2014, prospects for a comprehensive overhaul of the corporate tax code appeared to brighten. In this case, appearances are MOREApr 23, 2013 1:38 PM ET
The President, key conservatives, and even some of the nation's biggest corporations are leaning toward trading special breaks for lower rates.
By Nina Easton, senior editor-at-large
FORTUNE -- The economy coughs and sputters and threatens to stall out -- again. Growth slows; unemployment ticks back up to 8.3%. Congress shamelessly convenes a five-week recess, while the President camps out under the comforting applause of the campaign trail.
The absurdity of Washington's inaction MOREAug 29, 2012 5:00 AM ET
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