- Aims to be revenue and distributionally neutral. The revenue target is the baseline that assumes current temporary tax provisions will not expire. This allows the target to be $400 billion less than the CBO baseline which assumes that the temporary provisions expire on schedule. (page 16)
- Dynamic scoring will be used in measuring the revenue effect. (page 16)
- Both the corporate and individual AMT are repealed.
- The corporate tax rate is a flat 20%.
- Individual tax rate structure – 0, 12, 25 and 33%. The 0% rate is the effective rate if income is below the standard deduction threshold and child credit amounts. Capital gains are taxed at the same rate but only 50% of investment income is taxed.
- Active business income of an individual is taxed at no more than 25%.
- Standard deduction for MFJ is $24,000, $18,000 for HH and $12,000 for Single.
- Credits: EITC, modified child credit and some type of education benefit to be designed by House Ways & Means Committee.
- Repeal the estate and generation-skipping transfer taxes; no mention of gift taxes or treatment of gains and losses at date of death.
- Businesses - immediate expensing of assets other than land and inventory. LIFO remains.
- Section 199 deduction and most credits other than for research are repealed.
- Move to a territorial system and more of a consumption tax system with a goal of being allowed to tax imports and exempt exports from tax. Details missing.
- Businesses only deduct interest expense to extent of interest income with excess carrying forward (under a true consumption tax, no interest income or expense would be reported).
- NOLs carryforward forever adjusted by an interest factor. NOLs can't reduce taxable income by more than 90%.
A centerpiece of the individual change is a postcard size return! I view this as telling us little and mostly being misleading. Our current tax system could be filed on a postcard. The size of the return submitted to the IRS just depends on how much summary information can be tolerated. Today's postcard could have the taxpayer's identification information, taxable income, tax, aggregate credits, refund/payment, signatures. That says nothing about the complexity of calculating all of these figures.
Here is the proposed postcard from the Republican Blueprint:
There is a lot missing from the postcard:
- Taxpayer's name, address and Social Security number.
- Dependent information.
- Business, rental and partnership information (Schedules C, E, and F).
- Capital gains and loss and Schedule D.
- Schedules for computing the credits (today forms exist for the EITC and education credits).
- What to do with the refund (today's return has information for direct deposit of the refund).
- Penalty of perjury statement.
- Taxpayer and preparer signatures.
I'll have more soon in an article I'll post.
There are many items in the plan worthy of discussion. A lot more details are also needed for that discussion.
What do you think?