This week, Chairman Dave Camp (R-MI) of the Ways and Means Committee, unveiled his long-awaited plan to reform the tax code. If enacted, Camp estimates the reform would create 1.8 million jobs, increase federal revenue by $700 billion in the next decade and increase economic activity by $3.4 trillion. Here are a few highlights:
Individual marginal rates:
- 10 percent rate for income up to $71,200 for joint filers
- 25 percent rate for income between $71,201 and $450,000 for joint filers
- 35 percent rate for income above $450,001 for joint filers
- Standard $22,000 deduction for joint filers (adjusted for inflation)
- Repeal of the Alternative Minimum Tax
Corporate marginal rates:
- 25 percent flat-rate phased-in by 2019
- Deducts 40 percent of the capital gain or dividend and remaining 60 percent is taxed as marginal rate of income.
Deductions and credits affecting you or your business:
- Increases child tax credit to $1500 per child
- Reduces mortgage interest deduction limit from $1 million to $500,000 of interest indebtedness
- Repeals deduction for a family’s out-of-pocket medical expenses
- Revises accelerated cost recovery tables for depreciable capital assets
- Repeals the medical device tax for sales after the date of enactment
- Repeals the inflation adjustment for the renewable energy production tax credits (PTC) for electricity and refined coal produced or sold after 2014. The credit would revert back to 1.5 cents per kilowatt-hour for the remainder of the 10 year period, and the entire PTC would be repealed for electricity or refined coal sold after 2024.
- Repeals expensing of the cost of any qualified property used for processing liquid fuel from crude oil or qualified fuels prior to 2014. The remaining cost would be recovered under normal depreciation rules.
- Provides $126.5 billion for the Highway Trust Fund through a one-time tax on accumulated foreign earnings that the taxpayer has the option to pay over an eight-year period.
- Considers interest on private activity bonds (PABs) issued after 2014 as taxable income.
- Imposes a 0.035 percent excise tax on financial institutions with more than $500 billion in assets.
- Requires private businesses with more than $10 million revenue to use accrual accounting, with some exceptions.
Click here to view the Washington Business Brief, Tax Reform Unveiled.