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Tuesday, February 25, 2014

House GOP Releases Tax Reform Plan

Tax Reform LogoThe House Ways & Means Committee Republicans today released a tax reform plan, Making Today’s Tax Code Simpler and Fairer while Creating More Jobs and Higher Take Home Pay for American Workers:

The Ways and Means Committee has held more than 30 separate hearings on comprehensive tax reform over the last three years and released three discussion drafts.

1.  Simplifying taxes for small business and their employees:

This draft is specifically focused on reducing the burden the tax code imposes on small businesses and their workers.  With about half of the private sector workforce employed by a small business – a total of nearly 60 million Americans –  every dollar spent on complying with an overly complex, burdensome and broken tax code is a dollar that cannot be used for investment, hiring and higher wages for American workers.

The discussion draft contains several core components that simplify tax compliance for small businesses and provide certainty with respect to the ability of small businesses to recover certain costs immediately.  These include widely supported reforms such as permanent section 179 expensing and expansion of the “cash accounting” method, amongst other provisions.  The discussion draft also includes two separate options designed to achieve greater uniformity between S corporations and partnerships – one that revises current rules and a second that replaces current tax rules with a new unified pass-through regime.

2.  Making Wall Street play by the rules:

The proposal seeks to modernize tax rules to minimize Wall Street’s ability to hide and disguise potentially significant risks through the abuse of derivatives and other novel financial products – an activity that was a contributing factor to the 2008 financial crisis.  The discussion draft also outlines changes to tax rules designed to provide greater simplicity and uniformity.

3.  Helping America compete and win when doing business overseas:

Despite losing jobs to foreign competitors, America is still using an outdated international tax system designed nearly 60 years ago.  Yet, in recent years, virtually every one of our major competitors around the globe has been actively reforming their tax laws.  Even our closest neighbors are getting ahead of us, as Canada has already reformed its tax code and Mexico is doing so right now.  If we don’t take action, we risk falling further behind.

An American tax code should make it easier for American companies to bring profits earned overseas back home to the U.S. – so they can be invested here – and that is the purpose of the international tax reform draft.

Press and blogosphere coverage:

http://taxprof.typepad.com/taxprof_blog/2014/02/house-gop-releases.html

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