By Rachna Choudhry, 1/16/15
Tax reform has consistently been a topic of interest on POPVOX. In the early days of the 114th Congress, the newly re-introduced Fair Tax Act has already generated considerable activity on POPVOX. Here's a look at the Fair Tax Act, and a few other newly introduced tax proposals. Share your voice on POPVOX. (New to POPVOX? Check out this slideshow tutorial.)
US Treasury Building, Washington DC
The Fair Tax Act Background
The proposal to repeal income, payroll and estate and gift taxes — replacing them with a national 23% sales tax — was first introduced in 1999. Former Rep. John Linder (R-GA) introduced the bill as HR 2525 in the 106th Congress in the House, with bipartisan support. While the bill had only seven cosponsors, four were Democrats. The Fair Tax Act was first introduced in the Senate in 2003 by Sen. Saxby Chambliss (R-GA) with one Democratic co-sponsor (S 1493 in the 108th Congress). In recent years, the bill has lost its bipartisan support, and was introduced in the 114th Congress with 61 original cosponsors in the House, and two in the Senate — all Republicans.
The Fair Tax Act in the 114th Congress
The Fair Tax Act was re-introduced in early January by Congressman Rob Woodall (R-GA) in the House and Senator Jerry Moran (R-KS):
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Fair Tax Act (HR 25 and S 155)
"To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States," according to the bill summary. Repeals the income tax, employment tax, and estate and gift tax. Imposes a national sales tax on the use or consumption in the United States of taxable property or services. Sets the sales tax rate at 23% in 2017, with adjustments to the rate in subsequent years. Allows exemptions from the tax for property or services purchased for business, export, or investment purposes, and for state government functions. Prohibits the funding of the Internal Revenue Service after FY2019.
Other Tax Reform Bills
Several proposals related to tax reform have already been introduced in the 114th Congress. Here are a few:
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Repealing the 16th Amendment (HJRes 16)
"Would create a maximum level of taxation that any one individual can be subjected to from all levels of government combined – federal, state, municipalities, and other taxing authorities. Under this legislation, no individual would be responsible for a level of personal taxation greater than 50% of their income, and Jolly’s commitment is to then work to significantly reduce that threshold," according to the bill sponsor.
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Alternative Maximum Tax Act (HR 144)
"Would create a maximum level of taxation that any one individual can be subjected to from all levels of government combined – federal, state, municipalities, and other taxing authorities. Under this legislation, no individual would be responsible for a level of personal taxation greater than 50% of their income, and Jolly’s commitment is to then work to significantly reduce that threshold," according to the bill sponsor.
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Fairness in Taxation Act (HR 389)
Would impose increased rates of tax with respect to taxpayers with more than $1,000,000 taxable income.
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Paying a Fair Share Act (The "Buffett Rule") (HR 362 and S 161)
"Would help ensure that multi-million-dollar earners pay at least a 30 percent effective federal tax rate, and would generate over $70 billion in revenue over ten years," according to bill sponsors. "The legislation would apply only to taxpayers with income over $1 million – including capital gains and dividends. Taxpayers earning over $2 million would be subject to a 30% minimum federal tax rate. The tax would be phased in for incomes between $1 million and $2 million, with those taxpayers paying a portion of the extra tax required to get them to a 30% effective tax rate. The bill also includes language to preserve the incentive for charitable giving."
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Stop Tax Haven Abuse Act (HR 297 and S 174)
"Closes a number of offshore tax loopholes, eliminates many tax incentives for US companies to move jobs and operations offshore, and modifies rules on corporate inversions for businesses dodging US taxes," according to bill sponsors.
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Tax Code Termination Act (HR 27)
"Sunsets the current IRS tax code by December 31, 2019, and calls on Congress to approve a new federal tax system by July of the same year," according to the bill sponsor.
The Tax Reform Act
In early 2014, the House Republican leadership began discussing comprehensive tax reform. The long-awaited proposal was finally introduced the day before the House adjourned in Dec. 2014. The Tax Reform Act received the coveted "HR 1" bill number for the 113th Congress, indicating its importance to the House leadership. The bill's sponsor, Rep. Dave Camp (R-MI), who was also the Chairman of the House Committee on Ways & Means, has retired, and the bill has yet to be picked up for re-introduction in the 114th Congress.
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Tax Reform Act (HR 1 in the 113th Congress)
To amend the Internal Revenue Code of 1986 to provide for comprehensive tax reform. Flattens the code by reducing rates and collapsing today’s brackets into two brackets of 10 and 25 percent for virtually all taxable income, ensuring that over 99 percent of all taxpayers face maximum rates of 25 percent or less. Reduces the corporate rate to 25 percent. Increases the standard deduction. Taxes long-term capital gains and dividends as ordinary income, but exempts 40 percent of such income from tax. Repeals the Alternative Minimum Tax (AMT) for individuals. (Read more.)
— Please keep in mind that highlighting a bill doesn't imply a POPVOX endorsement in any way. Rather, we're simply trying to offer one more way to stay informed of a complex legislative system. —
