A draft tax reform proposal that Rep. Dave Camp, chairman of the House Ways and Means Committee, unveiled on Wednesday is being viewed as an encouraging sign by the business community.
Despite skepticism on whether tax reform can move through Congress in an election year, Camp put forward a 979-page plan that promises to stimulate economic growth and foster job creation.
Under Camp’s Tax Reform Act of 2014, tax brackets will be reduced to two from seven. The rates for almost all taxable incomes will be reduced too, at 10 percent and 25 percent. Corporate tax rates would be 25 percent instead of 35 percent.
The tax reduction stayed true to the Republicans’ “no tax increase” mantra. It also increases the standard deduction to $11,000 for individuals and $22,000 for married couples.
The National Retail Federation, or NRF, applauded Camp’s proposed overhaul, saying it gives the nation a simpler and fairer tax system that was “desperately needed.”
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“This is the foundation for job creation, increased take-home pay and business growth that would restore the prosperity that has slipped away for far too many American families," said NRF President and CEO Matthew Shay in a statement.
The Boeing Co. (NYSE:BA) called the plan an “an important step towards comprehensive tax reform,” saying it will strengthen America’s competitiveness.
“The Boeing Company has long supported a simplified tax code that lowers the corporate tax rate to a globally competitive level and broadens the tax base,” a press release read. “We are pleased to see this process move forward and encourage our elected officials to get behind a bipartisan tax reform effort that grows the economy and creates more jobs in the United States.”
Former senior tax advisor for the Senate Finance Committee Ike Brannon also believes the proposal is a good first step. He called the current tax code “hopelessly complicated and counterproductive.”
“Lowering rates while generating the same amount of revenue is no mean feat,” he said. “Reforming the tax code is a difficult and controversial exercise, which is why it has not happened in nearly thirty years. Dave Camp should be applauded for risking the wrath of entrenched interests in his quest to lower rates and generate more economic growth.”
Despite its bold promises, some lawmakers like Sen. Chuck Schumer, D-N.Y., say the idea is “dead on arrival.” Schumer said this is because Camp’s plan has eliminated state and local tax deductions in high-tax states like New York.
According to the Joint Committee on Taxation, some 1.8 million private sector jobs will be created if this overhaul is enacted, and GDP will increase by $3.4 trillion. Ordinary Americans, specifically a middle-class family of four, could see an extra $1,300 a year in their pockets.
“It is no secret that Americans are struggling,” Camp said in a press statement. “Far too many families haven’t seen a pay raise in years. Many have lost hope and stopped looking for a job. And too many kids coming out of college are buried under a mountain of debt and have few prospects for a good-paying career.”