House Republicans roll out new blueprint for tax reform

House Republicans on Friday are unveiling a blueprint for reforming the tax code, providing the final plank of an election-year platform spearheaded by Speaker Paul Ryan (R-Wis.).

The proposal calls for lowering rates, moving the United States toward a consumption-based tax system and revamping the IRS. GOP lawmakers designed it to foster economic growth, make the tax code simpler and eliminate the reasons why companies would participate in offshore tax deals known as “inversions.”

{mosads}“The approach reflected in this blueprint will be simple enough to fit on a postcard for most Americans,” the paper states.

The 35-page document provides some specifics, but leaves the details of legislation up to members of the House Ways and Means Committee.

“The legislation that the Committee will develop will be ready for legislative action in 2017,” the paper said.

Ways and Means Committee Chairman Kevin Brady (R-Texas) said that “the blueprint is the beginning of our conversation with the American people and we look forward to hearing their ideas.”

“This is not our tax code — this is the American people’s tax code, and we need their input,” he added.

The blueprint is the last of the six papers House Republicans are releasing this month as part of Ryan’s “better way” agenda. Others have been about poverty, healthcare and national security.

While the blueprint and presumptive GOP presidential nominee Donald Trump’s tax plan both call for lowering rates and curbing tax preferences for special interests, the documents have a number of differences.

Ryan said on “The Michael Medved Show” last month that he did not think House Republicans and Trump were far apart on taxes, and has expressed confidence that Trump would enact legislation that Republicans would pass.

The blueprint is intended to be revenue neutral after economic effects are taken into account.

On the individual side of the tax code, the blueprint would collapse the current seven tax brackets to three, with the top rate declining from 39.6 percent to 33 percent.

People would be able to deduct 50 percent of the taxes on their income from net capital gains, interest and dividends, meaning that the top rate on investment income would be 16.5 percent.

Five family tax benefits would be consolidated to two: a larger standard deduction and an increased child tax credit (CTC). Taxpayers would have to provide their Social Security numbers to claim the refundable part of the CTC.

The proposal would do away with all itemized deductions except those for mortgage interest and charitable contributions, and it would also repeal other “special interest provisions.” It would eliminate the alternative minimum tax and the estate tax as well.

The Earned Income Tax Credit, which benefits low-income workers, would be retained, but Ways and Means would look at reforming it to reduce improper payments. Ways and Means will also work to streamline higher-education tax preferences and incentives for retirement savings, the blueprint stated.

Income from small businesses organized as pass-through entities would be taxed at a maximum rate of 25 percent, which would be the lowest rate since before World War II. These businesses currently have their income taxed through the individual code at rates as high as 44.6 percent, according to the paper.

The corporate tax rate will be cut from 35 percent to 20 percent — the largest reduction in U.S. history, according to the document.

Businesses would be able to immediately write off the costs of their capital investments. Corporate tax deductions and credits would generally be eliminated, including the deduction for net interest expense. The research and development tax credit would still exist.

On the international front, the blueprint would move from having a worldwide system — in which U.S. corporations have to pay U.S. taxes on income earned abroad — to a territorial system, in which U.S. companies don’t have to pay a U.S. tax on dividends from their foreign subsidiaries. Foreign earnings that corporations earned under the current tax system could be repatriated at low tax rates.

Currently, products made in the United States are subject to U.S. tax regardless of where they are sold, and products made abroad are generally exempt from U.S. tax even if they are imported here. But under the blueprint, products consumed in the U.S. will be subject to U.S. tax regardless of where they are made, and U.S. goods that are exported would not be subject to tax.

The blueprint would also streamline the IRS’s structure, ensuring that the agency is focused on customer service. The new IRS would be led by an administrator who would have a term of three years and could only be reappointed once.