House Republicans on Tuesday will propose a dramatic reshuffling of the tax code, suggesting collapsing individual tax brackets into two brackets with lower tax rates and slashing the top corporate tax rate.
House Budget Committee Chairman Paul Ryan (R-Wis.) plans to unveil his spending plan Tuesday morning during a Capitol Hill news conference and follow it up later with a speech at the American Enterprise Institute. The proposal would replace the current tax structure’s six brackets with just two tax levels, 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 under the current structure. 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 upper-middle-income earners.
Republicans have been urging an overhaul that would make the tax code simpler and easier to understand while lowering rates, which they believe will spur economic growth and prove a politically potent election -year message. Ryan’s proposal is similar to ones offered by both GOP presidential candidates former Massachusetts governor Mitt Romney and former Pennsylvania senator Rick Santorum.
Ahead of Tuesday’s release, Ryan’s office released another slickly produced video previewing the proposal:
In the video (similar to one released Friday), Ryan promises “a specific plan of action that cuts spending, pays off the debt and gets our economy back on the path to prosperity.”
The video doesn’t share specific proposals to overhaul Medicare, but Ryan vows that his plan “includes no changes for those in or near retirement and, instead of government bureaucrats, puts patients in control of their health-care decisions.”
Once the plan is unveiled, the House Budget Committee plans to vote on it Wednesday and Ryan will speak again about the proposal Thursday at the Heritage Foundation.
Reports indicate that Ryan plans to set discretionary spending below a cap agreed to by the White House and congressional Republicans during last year’s dramatic negotiations to raise the nation’s debt ceiling. That would make the plan a nonstarter in the Democratic-controlled Senate, where two leading senators warned Monday that deep agency spending cuts 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 to House Republican leaders.
Conrad said he also plans to file a resolution saying the Senate wants to stick with the spending levels set last summer.
Such disagreements are exactly what moderate Republicans on the House Budget and Appropriations committees hope to avoid. Some GOP aides have signaled that Republicans serving on both panels may vote against the Ryan plan, or at least voice strong objections, in hopes of ensuring a smooth appropriations process slated to begin next month. House Republicans are hoping to wrap up the budget by the August recess.
Ahead of Tuesday’s release, the Democratic Congressional Campaign Committee launched a campaign called “Medicare Madness” targeting 41 House Republicans that 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!”
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