Today, House Ways and Means Chairman Dave Camp released his comprehensive tax reform draft legislation (“Tax Reform Act of 2014.”)

Under Congressman Camp’s bill, the current seven tax brackets would be consolidated and simplified into two brackets of 10 percent and 25 percent, with a 10 percent surtax. (Note that the Ways and Means explanation describes the proposal as a three-bracket system while the Joint Committee explanation refers to it as a two-bracket system with a surtax). The surtax applies to “Modified Adjusted Gross Income” over $400,000 for single taxpayers and $450,000 for joint filers. The surtax apparently replaces the alternative minimum tax, which would be repealed. The basic and additional standard deductions would be consolidated into a single standard deduction of $22,000 for joint filers (and surviving spouses) and $11,000 for other individual filers.  The deduction for personal exemptions would be repealed and itemized deductions would be phased out at income levels above $250,000 ($300,000 joint filers). The child tax credit would be expanded, but many other deductions would be limited or repealed, including halving to $500,000 the maximum amount of indebtedness with respect to which home mortgage interest is deductible, and repealing the deductibility of student loan interest.

The corporate tax revisions would phase in a flat 25% tax rate over the next five years. The proposal would adopt a 95% exemption system for dividends received from a foreign subsidiary, but would expand the categories of subpart F income subject to immediate taxation to include a new intangible income category: “foreign base company intangible income.” A transition tax would apply to post-1986 foreign subsidiary earnings and profits not previously subject to U.S. taxation.

Congressman Camp said, “This legislation does not reflect ideas solely advanced by Democrats or ideas solely advanced by Republicans, nor is it limited to the halls of Congress. Instead, this is a comprehensive plan that reflects input and ideas championed by Congress, the Administration and, most importantly, the American people.  In other words, it recognizes that everyone is a part of this effort and can benefit when we have a code that is simpler and fairer.”

The draft legislation can be viewed here along with a detailed section by-section and JCT materials.