National Journal's CongressDaily
February 23, 2010 Tuesday
Wyden, Gregg Release Overhaul Details
by Peter Cohn
Sen.Ron Wyden, D-Ore., and Senate Budget ranking memberJudd Greggtoday unveiled their bipartisan overhaul of the tax code that takes aim at numerous corporate sacred cows in exchange for a dramatically reduced overall corporate tax rate.
Their proposal would cut the corporate rate from a maximum of 35 percent to a single flat rate of 24 percent, which is highly sought after by the business community, particularly multinationals. But that move comes at a high price, including the elimination of numerous deductions and other tax preferences corporations have enjoyed for years, including deferral of tax on overseas profits until they are brought back to the United States and a deduction for domestic manufacturing activities.
Individuals would see a maximum tax rate of 35 percent, down from what is expected to rise nearly 5 percentage points when the 2001 tax cuts expire at the end of this year. There would only be three tax rates under the Wyden-Gregg plan: 15 percent, 25 percent and 35 percent. That means some individuals and families will see tax increases, although the average taxpayer with $200,000 or less in annual adjusted gross income would benefit, according to the Congressional Research Service.
The alternative minimum tax, which hits more middle-class families each year because it was never indexed for inflation, would be eliminated.
Some tax breaks for individuals would be repealed, including numerous exclusions from tax such as for income earned abroad; health benefits under cafeteria plans; employee meals and lodging; and moving expenses. But the standard deduction would nearly triple, while many common itemized deductions would remain in effect.
Some additional revenue-raising proposals are included as well, such as applying the Medicare payroll tax to all state and local government employees and legalizing, regulating and taxing Internet gambling.
"By simplifying the tax code and scaling back tax breaks for special interests, we can give everyone an opportunity to get ahead. Businesses of all sizes will be in a better position to compete and grow jobs. Working families will keep more of their hard-earned dollars, and everyone will spend a lot less time filling out tax forms," Wyden said.
The plan drew praise from groups ranging from the anti-tax Americans for Tax Reform to the progressive Citizens for Tax Justice. But business groups representing multinational firms were wary about the elimination of so many existing tax breaks, including those that bring down the effective tax rate they pay to less than 24 percent in the case of some companies.
"There are winners and losers: oil companies -- losers, for example. Worldwide companies would get a hit, manufacturers would get a hit; it's very problematic and would cause a lot of concern among our members," said Dorothy Coleman, vice president of tax and domestic economic policy at the National Association of Manufacturers.
Official cost estimates were unavailable. But according to a rough analysis provided by CRS, the Wyden-Gregg plan would cost nearly $900 billion more over a decade than the tax proposals outlined in President Obama's budget plan. All but about $230 billion would be offset by eliminating various deductions and credits, with the remainder offset through cutting back on corporate subsidies.