House Republicans call for postcard-simple tax returns

paul ryan 062316

Simplify the tax code and whittle down the tax return to the size of a postcard. Lower tax rates. Expand key tax breaks and eliminate most others.

That's what a tax reform blueprint put out by House Republicans on Friday promises to do.

The blueprint doesn't say how much money the reformed tax code would raise, but says the aim is to raise as much as the current code. Given all its rate cuts and the repeal of several taxes, however, House Republicans plan to rely on faster economic growth to achieve that goal.

Here are a few highlights from the plan:

Goal 1: Streamline and simplify.

The House GOP blueprint reduces the number of tax rates from six to three. It consolidates or eliminates most tax breaks. And it promises that the revised tax code will be simple enough that most Americans can file their taxes on a postcard.

Goal 2: Lower rates.

The new individual income tax rates would be 12%, 25% and 33%, well below the 39.6% top rate today.

And while the bottom 12% rate is higher than today's 10% bracket, a much higher standard deduction would mean that low-income taxpayers would pay lower taxes than they do currently, the blueprint promises. (No objective outside analyses of the plan have been done yet.)

Rates would also be lower for businesses. Corporations would be subject to a top rate of 20%, nearly half of today's top rate. And U.S. multinationals would no longer be required to pay U.S. taxes on money earned abroad.

The blueprint also would create a new business tax rate of 25% for small businesses, partnerships and so-called S corporations. Currently many file under the individual income tax code with its top rate of 39.6%.

Goal 3: Kill taxes Republicans rail against.

The estate tax would be repealed, as would the Alternative Minimum Tax and Obamacare taxes.

Goal 4: Preserve deductions for mortgage interest and charity.

The blueprint would effectively eliminate all itemized deductions except those for mortgage interest and charitable contributions. But their structure may change, as the blueprint calls on House tax writers to make them more effective and efficient.

Goal 5: Lower investment taxes.

The House GOP plan would cut taxes on dividends and interest earned from stocks and mutual funds. That would result in a top effective rate of either 6%, 12.5% or 16.5% depending on one's tax bracket.

Today, long-term capital gains and dividends are taxed at a top rate of 20% for high-income investors and 15% for most other investors. Short-term gains and interest are taxed at one's top income tax rate.

Goal 6: Consolidate education and retirement savings breaks.

There are a ton of tax breaks related to education and retirement savings under the current code, each with their own eligibility criteria and rules. The blueprint calls on House tax writers to simplify and consolidate them.

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