House Ways and Means Committee Chairman Dave Camp (R-Mich.) today released the details of his long awaited tax reform proposal. Arent Fox Senior Government Relations Advisor Phil English, a former congressman who was a long-time member of the House Ways and Means Committee, said the draft represents a major breakthrough in terms of the Republican Party’s vision for tax reform, adding that it plows new ground, bringing the Republican Party together with the common goal of making significant tax reform a reality.

In extended comments, former Rep. English said, “The proposal put forward by Chairman Camp is an authentic, ‘break the mold’ tax proposal. It will have to be debated exhaustively to determine if this simpler tax code, and the economic growth it promises, outweighs the trade-offs being proposed. It is significant to note that by proposing a new surtax on high-earning individuals and a levy on financial institutions, Ways and Means is making a real bid to find common ground and bolster bipartisan and bicameral support. These ideas will go a long way to challenge manufacturers, technology firms and the real estate industry to assess whether lower rates are worth the sacrifices of removing favorable incentives embedded in the current tax code. I also anticipate a major debate on how this proposal will change the taxation of international income and whether it represents the best approach to reversing recent trends which have been driving jobs offshore.”

Arent Fox Senior Policy Advisor Byron Dorgan, a former senator who served on the Ways and Means Committee when he was in the US House of Representatives, said the tax reform proposals coming from the House and Senate are the first steps in a very long process. “Our tax code is in desperate need of reform. It has become both unbelievably complicated and patently unfair in many ways,” he said. “Chairman Camp has offered a set of ideas today and I expect Finance Committee Chairman Ron Wyden to similarly offer his own ideas in the future. I was on the Ways and Means Committee in 1986, the last time major tax reform was accomplished. Based on that experience, this will be a long, but necessary process. Our country deserves a better and fairer tax code.”

Some important proposals included in the draft include:

  • Reducing the overall number of tax brackets from seven to two: 10 percent for those earning below $75,000 and 25 percent for those above that annual income level;
  • Reducing the top corporate and top individual rates to 25 percent (from 35 percent and 39.6 percent respectively);
  • Implementing a 10 percent surtax for those joint filers earning above $ 450,000 a year. Municipal bond interest would be included in the surtax base as would employer-provided health insurance premiums;
  • Treating capital gains and dividend income as regular income while providing a 40% exclusion — effectively lowering the tax rate;
  • Capping the new home mortgage interest deduction at $500,000;
  • Repealing the state and local tax deduction;
  • Modifying the charitable deduction in several ways, including imposition of a two percent of AGI floor for an individual to deduct charitable contributions;
  • Requiring US banks and insurance companies to pay a quarterly 3.5 basis-point tax on assets over $500 billion;
  • Eliminating the individual alternative minimum tax (AMT);
  • Eliminating the current Modified Cost Recovery System (MACRS);
  • Making permanent a modified R&D tax credit;
  • Requiring amortization rather than expensing on certain research and experimentation expenses;
  • Consolidating the basic and standard deductions into a single standard deduction of $11,000 for single/$22,000 for joint filers which begins phasing out at $300,000.

The draft — including an analysis from the Joint Committee on Taxation — can be found here.