When Dave Camp (R-MI), chairman of the House Committee on Ways and Means and one of the most respected tax law authors in Congress, released his tax reform plan earlier this year, it was automatically considered as the go-to plan that would form the basis of any legislation that simplifies and overhauls the entire tax code.
But now the onus for any proposed tax reform is shifting from the House to the Senate. Last week, Senators Mike Lee (R-UT) and Marco Rubio (R-FL) came up with their own tax reform plan which sharply diverges from Camp’s plan.
The Lee-Rubio plan would allow companies to take a full and immediate deduction for all investments. It would consolidate existing income tax brackets into two brackets - 15 and 35 percent.
Their plan eliminates the marriage penalty, where married couples end up paying higher taxes than if they filed individually.
The Lee-Rubio plan also hikes the child tax credit of $1,000 to a $3,500 refundable tax credit, applicable against income taxes and payroll taxes.
They also say they plan to cut the corporate tax rate, but do not specify the new rate. There is also no date as yet for when the plan will be introduced as legislation. Dave Camp’s plan has already been introduced as the Tax Reform Act of 2014.
This brings us to an important issue - Rep. Dave Camp is retiring at the end of this Congressional session and won’t be returning to perch on Ways and Means next year. It’s fair to say that the Lee-Rubio tax reform plan would firmly put the onus for tax reform on the Senate.
This in turn raises the question of what happens to this plan if the Democrats retain control of the Senate. Nothing much, because then the Senate’s tax reform plan would have to be introduced by a Democrat or at least as bipartisan legislation, in order to stand a chance of making it through the Senate.
But in that case, the Senate’s plan would no doubt be firmly opposed by the House, which will simply pass the Dave Camp plan and wait for the Senate to follow suit. This standoff could be avoided if the Senate and House are both controlled by the Republicans.
In other words, the proposed Lee-Rubio plan is laying the foundation in case the Republicans gain control of the Senate. Regardless of whether this plan or the Dave Camp plan is ultimately made use of, that would be good news in terms of the fact that long-overdue tax reform now looks good to be passed by both the House and Senate early next year.
Photo credit – tax.house.gov