House Republicans to propose dramatic changes to tax code

By Rosalind S. Helderman and Ed O’Keefe,

House Republicans on Tuesday will propose a dramatic reshuffling of the tax code that would collapse the range of individual tax brackets into just two, with lower rates, and slash the top tax rate for corporations.

Under a budget plan that will be unveiled by Budget Committee Chairman Paul Ryan (R-Wis.), Republicans will propose replacing the current structure of six brackets for individuals with just two tax levels, with a 10 percent marginal tax rate for lower income earners and 25 percent for upper income earners.

That would be a reduction from a top marginal rate of 35 percent currently.

The plan would also lower the top corporate income tax rate to 25 percent and virtually eliminate taxes on corporate profits brought back from overseas. And it would do away with the alternative minimum tax, which was designed to hit the wealthiest taxpayers but increasingly also affects middle-income earners.

Republicans have been urging an overhaul that would make the tax code simpler while lowering rates, which they think will spur economic growth and provide them with a politically potent election-year message. Ryan’s proposal is similar to ones by GOP presidential candidates Mitt Romney and Rick Santorum.

Democrats have been gearing up to tackle other aspects of Ryan’s budget proposal — notably efforts to reshape Medicare and to slash federal agency spending beneath the $1.047 trillion level agreed to during the summer’s hard-fought battle over raising the debt ceiling.

Ryan plans to unveil his plan Tuesday morning during a Capitol Hill news conference and will later deliver a speech at the American Enterprise Institute.

Ahead of Tuesday’s release, the Democratic Congressional Campaign Committee launched a campaign called “Medicare Madness” targeting 41 House Republicans who Democrats hope to defeat in November. The effort includes robo-calls to constituents and a Web site that urges visitors to sign an online petition in support of the current Medicare system.

“Republicans are choosing between millionaires and Medicare,” the site reads. “Slashing Medicare to pay for multi-millionaire tax cuts? That’s madness!”

And on Monday, two key Democrats warned that deep spending cuts for agencies could lead to renewed threats of a shutdown. Ignoring the deal reached last summer “represents a breach of faith that will make it more difficult to negotiate future agreements,” Senate Budget Chairman Kent Conrad (D-N.D.) and Senate Appropriations Chairman Daniel Inouye (D-Hawaii) wrote House GOP leaders.

Conrad said he also plans to file a resolution saying the Senate wants to stick with the spending levels set in the summer.