WASHINGTON (REUTERS) - The US House of Representatives' top tax writer released a comprehensive tax code overhaul on Wednesday, but it was widely seen as dead-on-arrival in a Congress still deeply divided over fiscal policy.
Michigan's Dave Camp, the Republican chairman of the House Ways and Means Committee, called for simplifying the tax code by sharply reducing both tax rates and many widely used provisions that reduce taxable income.
Reaction was mixed, with analysts saying that the practical short-term impact of the Camp plan would likely be negligible, although it could serve as a model for further debate.
"We're not naive - there won't be tax reform this year," Greg Valliere, chief political strategist at Potomac Research Group, said in a client note.
"Republicans already are scrambling to distance themselves from Rep. Dave Camp's proposal ... since it hikes taxes on the rich and banks, eliminates the carried interest tax dodge and would kill scores of popular tax breaks," Mr Valliere said.
Asked about Camp's plan, Speaker of the House John Boehner of Ohio said it was only the start of a long "conversation ... It's just an outline, a discussion draft."
Mr Camp's plan was extremely detailed and called for a number of bold steps, including: - Reducing the number of tax brackets to three from seven, with tax rates of 10, 25 and 35 per cent;
- Increasing most taxpayers' standard deductions and child tax credits, but eliminating personal exemptions;
- Taxing long-term capital gains and dividends as ordinary income, but exempting 40 per cent of that income from any tax;
- Repealing the alternative minimum tax for individuals and businesses; and
- Cutting the top corporate income tax rate to 25 per cent from 35 per cent.
Mr Camp said his plan would "clean up" the carried interest provision that lets private equity partners and other financial interests pay lower taxes on large portions of their incomes.
He also said his plan would end a depreciation provision in the tax code that favors private jet owners. That provision and the carried interest loophole have both been targeted in the past by President Barack Obama.
The Camp plan also includes a tax on banks resembling one that Mr Obama once proposed for financial institutions with assets exceeding US$50 billion (S$63 billion).
White House spokesman Josh Earnest told reporters aboard Air Force One that Camp's proposal was a "positive development." Mr Earnest said the White House was encouraged by proposals to close the corporate jet and carried interest loopholes.
Adding that the White House also had concerns about the plan, Mr Earnest said: "Congressman Camp's proposal appears to actually add to the long-run deficit." Reflecting the response of a wide range of special interest groups, the Bond Dealers of America said it was "concerned"about Camp's idea for a 10-per cent surtax on high incomes that"could negatively impact municipal bonds."
The tax code has not been thoroughly overhauled in 27 years despite complaints about its complexity and its many loopholes.