Republicans Seek Tax Simplification

Republicans on the House Budget Committee on Tuesday will propose a drastically simplified tax system that strips away tax deductions and credits, eliminates tax brackets and leaves only two individual tax rates, 10 percent and 25 percent.

On the corporate side of the tax code, the business income tax rate would be lowered to 25 percent from 35 percent, and the existing worldwide system of taxing corporate profits would be changed to a territorial system where only domestic profits are subject to U.S. corporate taxation.

The tax plan will be part of a broader tax-and-spending blueprint that eschews tax increases, transforms entitlements like Medicare and Medicaid and cuts deeply into domestic spending to start bringing down the deficit.


The tax plan is a sharp repudiation of President Obama’s budget, which actually adds to the complexity of the tax code while bringing in more revenue from the rich, especially the super rich.

Mr. Obama proposed to allow tax cuts from President George W. Bush’s administration to expire for households earning over $250,000. Dividends, not taxed at 15 percent, would be taxed at ordinary income tax rates, as they were before the 2003 tax cuts passed. And a new Buffett Rule would replace the existing alternative minimum tax, ensuring that households with more than $1 million in annual income pay at least a 35 percent tax rate.

The House plan, in contrast, is not designed to bring in any additional revenue.

With their plan, House Republicans seek to set up as stark a contrast as possible to Mr. Obama in an election year, presenting voters with a clear choice in November: simplicity that in some cases could actually lower taxes for the rich, or a deficit reduction plan that leans heavily on higher taxes aimed at affluent families and leaves the current tax code largely unchanged.