How would you like to pay a lower tax rate? What if that lower rate comes at the expense of limiting your mortgage interest write-off? In the zero-sum game of modern tax policy, reform efforts come with a cost.
Students of the U.S. Constitution know any law raising revenue for the federal government has to begin as a bill in the U.S. House. Today that means tax changes must formally start in the House Ways and Means Committee. In the new week, the Republican chairman of that group, David Camp of Michigan, is expected to release his plan to rewrite large swaths of the tax code.
In the past, Camp has pushed to lower the top individual and corporate tax rate to 25 percent. Today, if you have a high enough income, you're paying a top rate of 39.6 percent. The corporate tax rate tops out at 35 percent today. "Reduce and broaden" has been the strategy: reduce the tax rate and broad
en the tax base. That will mean limiting or eliminating tax breaks such as the mortgage interest deduction.
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Earlier drafts also have tightened restrictions on how stock investors calculate profits and losses. Currently, if an investor has bought the same stock at different prices, the investor could identify which purchase price to use when selling the stock. Camp's earlier proposals would force investors to use an average purchase price, thus eliminating the flexibility of investors.
It may not be the grand bargain on taxes, but it may jump-start the serious work needed to overhaul the American tax system. If the process finds traction, no one will come out unscathed.
Tom Hudson, financial journalist. hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter HudsonsView.