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 The alternative minimum tax would be repealed.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.
Republican lawmaker Dave Camp has put private equity's cherished tax break on the table. The proposal would raise far more federal revenue than he thinks. Well, so long as anyone can understand it.
FORTUNE -- Rep. Dave Camp (R-MI), chairman of the House Ways and Means Committee, yesterday proposed a sweeping personal and business tax overhaul that includes (you guessed it) a change to how carried interest is treated. This MOREDan Primack - Feb 27, 2014 11:54 AM ET
A dividend by any other name is still a dividend. And it should be taxed as one.
FORTUNE -- Dear private equity: You may have a new tax problem.
For years, private equity firms have charged so-called "monitoring fees," in which an acquired company pays its private equity owners an annual sum for ongoing management and advisory services. And, for years, I've criticized these payments -- believing them to be more akin to dividends than fee MOREDan Primack - Feb 3, 2014 12:10 PM ET
Last night's address reflected the trimmed ambitions of a chief executive protecting accomplishments already on the books.Jan 29, 2014 2:27 PM ET
Millions of Americans could face draconian fines and penalties for offshore tax evasion.
By Lynnley Browning
FORTUNE -- Cuddly Beanie Babies have become a bizarre icon of tax horror ever since their billionaire American creator, Ty Warner, was socked last September with jaw-dropping fines for not disclosing his secret Swiss bank accounts.
Now the harshness -- and, at times, unevenness -- of the Internal Revenue Service in pursuing offshore tax dodgers has MOREJan 9, 2014 2:55 PM ET
Even some boldface names -- Tina Turner! -- are leaving Uncle Sam behind.
By Lynnley Browning
FORTUNE -- Time to dump your American passport -- and with it, presumably, your bothersome U.S. tax bill. The reason, international tax lawyers say, may have less to do with offshore tax evasion and more with a new generation of sophisticated -- and legal -- tax planning.
This year will enter the record books with the MORENov 14, 2013 10:49 AM ET
Congress wants to squeeze more tax revenue out of Twitter, but it's looking in the wrong place.
FORTUNE -- As Wall Street toasted Twitter this week, a very different view toward the company took hold in Washington, D.C., where Senators John McCain (R-AZ) and Carl Levin (D-MI) accused Twitter of exploiting a massive tax loophole. Specifically, they wrote:
"When Twitter goes public later this week, the company may avail itself of this existing MOREDan Primack - Nov 7, 2013 5:06 PM ET
A mistake made 20 years ago cost the Times big during the sale of the Boston Globe.
FORTUNE -- The New York Times Co.'s (NYT) purchase of the Boston Globe for more than $1 billion 20 years ago has turned out to be among the worst single newspaper acquisitions in history. But guess what? It's even worse than it looks.
How is that possible? Because the Times not only made a MOREAllan Sloan, senior editor-at-large - Nov 5, 2013 2:34 PM ET
The most likely way out of this mess will be to either kill the medical device maker tax or alter it in a way to make it acceptable to the industry.
By Cyrus Sanati
FORTUNE -- Medical device makers could end up the biggest winners in the ongoing and destructive congressional budget battle. It is extremely unlikely that Republicans will get their wish to delay implementation of the Affordable Care Act MOREOct 1, 2013 9:42 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
|The Deep Web you don't know about|
|Pizza chain Sbarro files for bankruptcy|
|Colorado gets $2 million from marijuana taxes|
|Invest $1 million, try for a U.S. green card|
|Shodan: The scariest search engine on the Internet|