Over the past few years, several members of Congress have issued comprehensive tax reform proposals. These taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. plans will likely play a large role in framing the tax policy debate in 2017 and beyond.
The chart below summarizes the major provisions in five recent Congressional tax reform proposals:
- The Tax Reform Act of 2014, introduced by former Congressman Dave Camp (R-MI)
- The Progressive Consumption Tax Act, introduced by Senator Ben Cardin (D-MD)
- The American Business Competitiveness Act, introduced by Congressman Devin Nunes (R-CA)
- The “A Better Way” Tax Reform Blueprint, issued by Speaker Paul Ryan (R-WI)
- The “Simplifying America’s Tax System” Plan, issued by Congressman Jim Renacci (R-OH)
To learn more about this chart, see this post.
Plans
- Dave Camp
- Ben Cardin
- Devin Nunes
- House GOP, 2016
- Jim Renacci
- Deselect All
Issues
individual Taxes:
- Rates on Ordinary Income
- Itemized Deductions
- Credits
- Alternative Minimum Tax
- Rates on Capital Gains and Dividends
business Taxes:
- Corporate Income TaxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. Rate
- Capital Expenses
- International Income
- Pass-through BusinessA pass-through business is a sole proprietorship, partnership, or S corporation that is not subject to the corporate income tax; instead, this business reports its income on the individual income tax returns of the owners and is taxed at individual income tax rates.
other Taxes:
- Payroll Taxes
- Estate TaxAn estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits, at the time of death. The tax is paid by the estate itself before assets are distributed to heirs.
- Other
| Issue | Plan |
|---|---|
Rates on Ordinary Income |
Dave CampEstablishes two tax brackets with rates of 10% and 25%, as well as an additional 10% surtax on income over $400,000. Consolidates the standard deduction and the personal exemption into a larger standard deduction of $11,000 ($22,000 for joint filers), which phases out for high-income earners. Adds an additional deduction of $5,500 for single taxpayers with at least one child. Ben CardinEstablishes three tax brackets with rates of 15%, 25%, and 28%. The top rate applies to taxable income over $250,000 ($500,000 for joint filers). Replaces the standard deduction and personal exemption with family allowances of $50,000 for singles, $75,000 for heads of household, and $100,000 for joint filers. Devin NunesNo specific proposal. House GOP, 2016Establishes three tax brackets with rates of 12%, 25%, and 33%. The top rate applies to taxable income over $190,150 ($231,450 for joint filers). Consolidates the standard deduction and the personal exemption into a larger standard deduction of $12,000 ($24,000 for joint filers). Adds an additional deduction of $6,000 for single taxpayers with at least one child. Jim RenacciEstablishes three tax brackets with rates of 10%, 25%, and 35%. The top rate applies to taxable income over $750,000 ($1,500,000 for joint filers). Increases the standard deduction to $15,000 ($30,000 for joint filers). Increases the personal exemption to $5,000. |
Itemized Deductions |
Dave CampEliminates the state and local tax deduction, as well as several other itemized deductions. Caps the mortgage interest deduction at $500,000 of debt. Eliminates the Pease limitation on itemized deductions. Ben CardinEliminates several deductions but preserves most major itemized deductions, including the charitable contributions deduction, the state and local tax deduction, and mortgage interest deduction. Eliminates the Pease limitation on itemized deductions. Devin NunesNo specific proposal. House GOP, 2016Eliminates all itemized deductions except the mortgage interest deduction and the charitable contributions deduction. Jim RenacciEliminates all itemized deductions except the mortgage interest deduction and the charitable contributions deduction. Caps the mortgage interest deduction at $500,000 of debt. |
Credits |
Dave CampEliminates several personal credits. Expands the child tax credit from $1,000 per child to $1,500 per child and $500 for non-child dependents, with credit amuounts indexed to chained CPI. Modifies the parameters of the earned income tax credit. Ben CardinEliminates most personal credits, including the earned income tax credit and the child tax credit. Creates a comprehensive earned income rebate, which is structured similarly to the current earned income tax credit, phasing in at low levels of earned income, phasing out as earned income rises, and offering a larger rebate to households with children. Devin NunesNo specific proposal. House GOP, 2016Increases the child tax credit to $1,500, the first $1,000 of which is refundable. Raises the phaseout threshold for the child tax credit for married households from $110,000 to $150,000. Jim RenacciEliminates most personal credits. Retains the child tax credit. Expands the earned income tax credit by increasing phase-in rates by 100% for childless workers and 40% for others. |
Alternative Minimum Tax |
Dave CampEliminates the alternative minimum tax. Ben CardinEliminates the alternative minimum tax. Devin NunesEliminates the alternative minimum tax. House GOP, 2016Eliminates the alternative minimum tax. Jim RenacciEliminates the alternative minimum tax. |
Rates on Capital Gains and Dividends |
Dave CampTaxes capital gains, dividends, and interest as ordinary income, with a 40% exclusion. This is equivalent to taxing investment income at 60% the marginal rates of ordinary income (6%, 15%, and 21%). Ben CardinTaxes long-term capital gains and qualified dividends as ordinary income. Eliminates the 3.8% net investment income surtax. Devin NunesPrserves the current rates on long-term capital gains and qualified dividends, and taxes interest income at these rates as well. House GOP, 2016Taxes capital gains, dividends, and interest as ordinary income, with a 50% exclusion. This is equivalent to taxing investment income at half the marginal rates of ordinary income (6%, 12.5%, and 16.5%). Jim RenacciTaxes capital gains and dividends as ordinary income. |
Corporate Income Tax Rate |
Dave CampLowers the corporate tax rate to 25% over 5 years. Ben CardinLowers the corporate tax rate to 17%. Devin NunesLowers the corporate tax rate to 25%. House GOP, 2016Lowers the corporate tax rate to 20%. Jim RenacciEliminates the corporate income tax. |
Capital Expenses |
Dave CampEliminates the modified accelerated cost recovery system (MACRS) and replaces it with a system similar to the alternative depreciation system (ADS). Adjusts the basis of depreciable assets for inflation. Repeals last-in, first-out accounting and adds existing business LIFO reserves into the taxable income over a three-year period. Ben CardinNo specific proposal. Devin NunesMoves to full expensing of capital investment. Allows businesses to carry back unused deductions up to five years or carry them forward with interest. House GOP, 2016Moves to full expensing of capital investment. Preserves the last-in, first-out method of accounting. Jim RenacciNo specific proposal. |
International Income |
Dave CampShifts to a territorial tax system. Enacts a deemed repatriation of foreign income at a tax rate of 8.75% for cash and cash-equivalent profits and 3.5% on other profits. Modifies several rules related to the tax treatment of foreign-source income, such as Subpart F and the foreign tax credit. Creates several new anti-abuse rules regarding the taxation of foreign-source income, including a minimum tax rate on foreign-source intangible income and a new limitation on business interest deductions. Ben CardinNo specific proposal. Devin NunesShifts to a territorial tax system. Enacts a charge of 5% on unrepatriated foreign-source income. House GOP, 2016Shifts to a territorial tax system. Enacts a deemed repatriation of foreign income at a tax rate of 8.75% for cash and cash-equivalent profits and 3.5% on other profits. Makes the federal income tax border-adjustable, exempting business from paying taxes on exports but denying them a deduction for cost of imported goods. Jim RenacciEnacts a deemed repatriation of foreign income at a tax rate of 8.75% for cash and cash-equivalent profits and 3.5% on other profits. |
Pass-through Business |
Dave CampTaxes domestic manufacturing income of pass-through businesses at a maximum rate of 25%, by exempting it from the 10% “surtax” on incomes over $400,000. Ben CardinNo specific proposal. Devin NunesLowers the top rate on pass-through businesses to 25%. House GOP, 2016Lowers the top rate on pass-through businesses to 25%. Jim RenacciAllows pass-through businesses to elect to be treated as corporations, with no entity-level income tax. |
Payroll Taxes |
Dave CampRequires some owners of pass-through businesses to pay self-employment taxes. Ben CardinNo specific proposal. Devin NunesNo specific proposal. House GOP, 2016No specific proposal. Jim RenacciNo specific proposal. |
Estate Tax |
Dave CampNo specific proposal. Ben CardinNo specific proposal. Devin NunesNo specific proposal. House GOP, 2016Eliminates the estate tax. Jim RenacciNo specific proposal. |
Other |
Dave CampModifies, limits, and eliminates dozens of individual and business tax provisions. Significantly modifies rules for IRAs and 401(k) retirement savings plans. Indexes several tax parameters to chained CPI-U. Ben CardinEnacts a 10% credit-invoice value-added tax, or a rate modified to achieve revenue neutrality. The tax is border-adjusted. It exempts non-commercial government sales, most of the nonprofit sector, financial services, residential rents, and sales of exisiting residential housing. Devin NunesEliminates several business tax deductions and credits, including the domestic production activities deduction and various alternative energy credits. Eliminates the deductibility of net interest. House GOP, 2016Eliminates several business credits and deductions, including the domestic production activities deduction. Eliminates the deductibility of net interest. Jim RenacciEnacts a 7% credit-invoice value-added tax. The tax is border-adjusted and exempts non-profits and state and local governments. |