As the Gift Legacy.com weekly update on taxes pointed out both parties entered the debate this week on the appropriate top income tax rate. House Ways and Means Chair Dave Camp (R-MI) suggested that it would be important to start tax reform process by picking a top rate. His preference for a top individual and corporate tax rate is 25%.
Washington tax commentators noted that this low tax rate would require very substantial changes if the tax bill is revenue-neutral. That is, in order to reduce the top rate from 35% to 25%, there would be very substantial changes in all of the major tax deductions.
Former Congressional Budget Office Director Alice Rivlin commented on the 25% rate. She stated, "It's feasible to bring rates down, but only if you get rid of a lot of – almost all of – the loopholes and special provisions."
The Ranking Member on the House Ways and Means Committee is Sander M. Levin (D-MI). He expressed great concern about the proposal. Levin noted, "It's one thing to conceive a goal of a top tax rate of 25% for individuals and corporations – which would reduce revenues by $2 trillion over a decade." But he continued that it would be very difficult to understand "how it would work" when actually modifying the tax deductions.
House Member Jan Schakwkowsky (D-IL) was a member of the Fiscal Commission appointed by President Obama. She introduced the Fairness in Taxation Act. This bill creates high tax brackets for individuals with very large incomes. For those with incomes over $1 million per year, the tax rate would be 45%. The small number of persons with incomes over $1 billion per year would pay 49%.
Rep. Schakwkowsky quotes a number of individuals with incomes over a million dollars per year who believe that there should be higher taxes for very high income persons. Kathryn Myers is a millionaire from Pennsylvania. She stated, "I think very wealthy people like me should pay substantially higher taxes, since we have done exceedingly well in the last few decades."
The Ranking Member on the House Ways and Means Committee is Sander M. Levin (D-MI). He expressed great concern about the proposal. Levin noted, "It's one thing to conceive a goal of a top tax rate of 25% for individuals and corporations – which would reduce revenues by $2 trillion over a decade." But he continued that it would be very difficult to understand "how it would work" when actually modifying the tax deductions.
House Member Jan Schakwkowsky (D-IL) was a member of the Fiscal Commission appointed by President Obama. She introduced the Fairness in Taxation Act. This bill creates high tax brackets for individuals with very large incomes. For those with incomes over $1 million per year, the tax rate would be 45%. The small number of persons with incomes over $1 billion per year would pay 49%.
Rep. Schakwkowsky quotes a number of individuals with incomes over a million dollars per year who believe that there should be higher taxes for very high income persons. Kathryn Myers is a millionaire from Pennsylvania. She stated, "I think very wealthy people like me should pay substantially higher taxes, since we have done exceedingly well in the last few decades."
Taxes Are Too Complex
In a bipartisan statement, Senate Finance Chair Max Baucus (D-MT) and House Ways and Means Committee Chair Dave Camp (R-MI) agreed that taxes are in need of simplification.
Both taxwriters serve on the Joint Committee on Taxation (JCT). At the latest meeting of the Joint Committee, Chairman Camp stated, "There is no doubt that today's tax code is too complex, too costly and takes too much time to comply with." He indicated that it is now time to take a "comprehensive approach to tax reform" that will help to increase the number of jobs in America.
Sen. Baucus agreed and stated, "Our tax code should maximize job creation and widespread economic growth. As we work together to simplify the tax code and make it more fair and competitive, we need to be armed with the data showing the impact of potential changes to the code."
Both taxwriters are responding to the proposal by President Obama to pass a revenue-neutral tax reform for corporations. Treasury Secretary Tim Geithner testified before the House Committee on Appropriations and indicated that the White House looks forward to working with members of Congress and the business committee to design "a comprehensive, revenue-neutral reform of the corporate tax system." The goal will be to lower tax rates by reducing federal deductions.
Both the Senate Finance Committee and the House Ways and Means Committee are holding a series of tax reform hearings. Sen. Baucus and Rep. Camp are seeking to prepare legislation that would reform both corporate and personal taxes. The problem in lowering tax rates is that when any deductions are limited, there is strong opposition. However, both leaders are seriously pursuing major tax reform in 2011.
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