By Rachna Choudhry, 4/7/15
Tax reform has consistently been a topic of interest on POPVOX — so we are spotlighting it during tax season. Here's a look at some recently introduced tax proposals. Share your voice on POPVOX. (New to POPVOX? Check out this slideshow tutorial.)
Tax Reform in the Budget
The House and Senate budgets called for comprehensive tax reform. The House budget proposal “simplifies the tax code to make it fairer to American families and businesses and reduces the amount of time and resources necessary to comply with tax laws”; and “substantially lowers tax rates for individuals and consolidates the current seven individual income tax brackets into fewer brackets.” The Senate budget plan creates a reserve fund to be used to pay for a tax overhaul or to “extend certain expiring tax relief provisions.” But neither the House nor Senate offer specific plans for tax reform.
The Fair Tax Act
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 was re-introduced in early January by Congressman Rob Woodall (R-GA) in the House and Senator Jerry Moran (R-KS):
Fair Tax Act (HR 25 and S 155)
Sponsors: Rep. Rob Woodall (R-GA) and Sen. Jerry Moran (R-KS) "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:
Death Tax Repeal Act (HR 1105 and S 860 in the Senate)
Sponsor: Rep. Kevin Brady (R-TX) —Bipartisan— “The Death Tax is still the number one reason family-owned farms and businesses in America aren’t passed down to the next generation,” according to the bill sponsor. “It’s the wrong tax at the wrong time and hurts the wrong people. After a family loses a loved one, why should Uncle Sam swoop in and take much of the nest egg they spent a lifetime building? Especially when it forces the survivors to sell their land or business just to try to keep what they worked so hard to earn.” — Passed by the House Ways and Means Committee —
Permanently Repeal the Estate Tax Act (HR 725)
Sponsor: Rep. Bob Latta (R-OH) Repeals the federal estate tax, effective for estates of decedents dying after December 31, 2014.
Sensible Estate Tax Act (HR 1544)
Sponsor: Rep. Jim McDermott (D-WA) “Would bring the estate tax rates back to the pre-2001 levels, levels that worked and helped drive growth for all Americans, with a maximum marginal rate of 55% and a $1 million exemption ($2 million for married couples) – both would be indexed for inflation beginning in 2000. Current law allows for a $5 million exemption at a maximum rate of 35%, which allows over 99% of estates to pass tax-free,” according to the bill sponsors.
State and Local Sales Tax Deduction Fairness Act (HR 622)
Sponsor: Rep. Kevin Brady (R-TX) To amend the Internal Revenue Code of 1986 to make permanent the deduction of State and local general sales taxes. — Passed by the House Ways and Means Committee —
Making Sales Tax Deduction Permanent (S 126)
Sponsor: Sen. Dean Heller (R-NV) “Would provide tax fairness for taxpayers in states that don’t have an income tax, and therefore, taxpayers can’t claim a state income tax deduction on their federal tax returns,” according to the bill sponsor.
Taxpayer Bill of Rights Act (HR 1058)
Sponsor: Rep. Peter Roskam (R-IL) “Would ensure that taxpayers dealing with the IRS have the right to be informed and assisted, the right of appeal and the right to confidentiality, among others,” according to the bill sponsor. — Passed by the House Ways and Means Committee —
Seniors' Tax Simplification Act (HR 1397)
Sponsor: Rep. John Fleming (R-LA) “Under current law, seniors who collect Social Security aren’t able to file a 1040EZ and are forced to file more complicated tax forms – even though their finances are often simple. The Seniors' Tax Simplification Act would create one simple form, the 1040SR, for seniors who may receive the majority of their income through social security benefits. The bill would also lower the cost of compliance,” according to the bill sponsor.
Repealing Presidential Public Financing (HR 412)
Sponsor: Rep. Tom Cole (R-OK) To reduce Federal spending and the deficit by terminating taxpayer financing of presidential election campaigns.
Flat Tax Act (HR 1040)
Sponsor: Rep. Michael Burgess (R-TX) Amends the Internal Revenue Code to authorize an individual or a person engaged in business activity to make an irrevocable election to be subject to a flat tax (in lieu of the existing income tax provisions) of 19% for the first two years after an election is made, and 17% thereafter.
Mobile Workforce State Income Tax Simplification Act (S 386)
Sponsor: Sen. John Thune (R-SD) —Bipartisan— “Would simplify and standardize state income tax collection for employees who travel outside of their home state for temporary work assignments. The bill would also help employers who must file withholdings and reporting requirements. Currently, individuals and employers face up to 41 different state income tax reporting requirements that vary based on length of stay, income earned, or both,” according to the bill sponsor.
Repealing the 16th Amendment (HJRes 16)
Sponsor: Rep. Steve King (R-IA) “The federal government has the first lien on all productivity in America,” said Rep. King. “Ronald Reagan once said, ‘What you tax you get less of.’ Right now we tax all productivity. We need to turn that completely around and put the tax on consumption. That is why we need to repeal the 16th Amendment which authorizes the income tax. Replacing the current income tax with a consumption tax will ensure that productivity is not punished in our country, but rewarded,” according to the bill sponsor.
Alternative Maximum Tax Act (HR 144)
Sponsor: Rep. David Jolly (R-FL) "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.
Fairness in Taxation Act (HR 389)
Sponsor: Rep. Jan Schakowsky (D-IL) Would impose increased rates of tax with respect to taxpayers with more than $1,000,000 taxable income.
Paying a Fair Share Act (The "Buffett Rule") (HR 362 and S 161 in the Senate)
Sponsor: Rep. David Cicilline (D-RI) "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."
Tax Code Termination Act (HR 27)
Sponsor: Rep. Bob Goodlatte (R-VA) — Bipartisan — "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 of 2014
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.
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.
