Association Agenda: Tax Reform Tabled
A fresh election cycle means a long-sought tax overhaul will wait.
It’s a new year, but congressional tax writers aren’t any closer to overhauling a tax code they say is badly in need of simplification and reform.
House Speaker Paul Ryan (R-WI), who handed his gavel on the House Ways and Means Committee to Rep. Kevin Brady (R-TX) last fall, has taken comprehensive tax reform off the table until President Obama leaves the White House. Democrats, meanwhile, won’t agree to individual tax changes unless taxes are raised on the wealthy.
It’s been two years since Rep. Dave Camp (R-MI) put forward a detailed discussion draft outlining thousands of changes to tax policy for individuals and businesses. Camp’s plan would reduce the top corporate tax rate to 25 percent from the current 35 percent and the top individual tax rate to 35 percent (25 percent for certain income) from the current 39.6 percent. Doing so required that Camp raise revenue by eliminating certain tax breaks and changing others. ASAE was particularly interested at the time in dozens of provisions that would have affected the tax-exempt community, including changes to the tax treatment of royalty income and certain qualified sponsorship payments.
Brady has spoken favorably about the Camp plan but is likely to push his own ideas. He wants to reduce the corporate tax rate even lower than Camp, for example, to between 15 and 20 percent.
Changes to international tax policy could come separately and as soon as this year, Brady has said. Brady could push a one-time tax on existing foreign profits held by U.S. corporations but not on future foreign profits. He also supports the idea of an “innovation box,” essentially a tax break for companies’ patents and other intellectual property, which Brady says will encourage businesses to keep their research and development operations here in the U.S. Brady has called these international tax changes “a significant down payment on overall tax reform” but, again, says that broader reform probably won’t happen this year.