House Republicans and Senate Democrats are introducing competing budget plans with starkly different tax proposals.
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House Budget Committee Chairman Paul Ryan, R-Wis., introduced the latest version of his Path to Prosperity budget plan on Tuesday, with similar tax proposals as those the former Republican vice presidential nominee introduced the past two years. Ryan’s proposals aim to simplify the Tax Code to make it fairer to American families and businesses, reduce the amount of time and resources necessary to comply with tax laws, and substantially lower tax rates for individuals, with a goal of achieving a top individual rate of 25 percent. Ryan’s proposal would consolidate the current seven individual-income-tax brackets into two brackets of 10 and 25 percent.
Ryan's plan would also repeal the Alternative Minimum Tax, reduce the corporate tax rate to 25 percent, and transition the Tax Code to a more competitive system of international taxation. The goal would be to balance the budget in 10 years’ time without raising taxes.
“The current Tax Code is a Rubik's cube that Americans spend six billion hours—and $160 billion—each year trying to solve,” Ryan said in a Wall Street Journal editorial on Tuesday. “The U.S. corporate tax is the highest in the industrialized world. So our budget paves the way for comprehensive tax reform. It calls for Congress to simplify the code by closing loopholes and consolidating tax rates. Our goal is to have just two brackets: 10% and 25%. House Ways and Means Chairman Dave Camp has committed to pass a specific bill this year.”
Separately, Camp released his own set of tax reform proposals for small businesses on Tuesday (see Ways and Means Chairman Camp Proposes Small Business Tax Reforms).
Ryan’s plan also includes proposals for repealing the Affordable Care Act and partially privatizing Medicare by changing it into a voucher-like premium support program for those under the age of 55,. Senate Finance Committee chairman Max Baucus, D-Mont., criticized that element of the House Republican budget plan. “Any budget plan that undermines the fundamental promise of Medicare is wrong for seniors in Montana and across America,” he said in a statement. “Forcing our senior citizens to pay thousands more out of their own pockets will not make health care any more affordable, and it won’t help our economy. Only a balanced combination of sensible spending cuts and revenues will tackle the debt and keep our promise to today’s seniors and future generations.”
The Obama administration has postponed the release of its own budget plan until April 8, citing recent uncertainty over the budget sequester and passage of a continuing resolution to fund the federal government. The administration’s proposed budget was originally due according to law on the first Monday in February, which was February 4 of this year.
Instead, Senate Democrats previewed a budget plan of their own on Tuesday. Senate Budget Committee chair Patty Murray, D-Wash., plans to unveil a budget blueprint on Wednesday calling for $975 billion in new tax revenue over the next 10 years from closing tax loopholes and ending tax expenditures. Her plan aims to reduce the budget deficit with through a mix of approximately 50 percent spending cuts and 50 percent tax revenue increases. A reconciliation procedure would be used to overcome the threat of a Senate filibuster.