Today the House Ways and Means Committee issued a proposed Income Tax Reform Plan (the Camp Plan). You can find several news articles on the plan, but here is the actual plan itself.
You can skip to pages 14-21 to see the outline of the plan. The rest is just other background material. If you don't have time to read it, here are a few key elements of the plan.
1) The Tax Reform Act of 2014 reduces and collapses today’s brackets into two brackets of
10 percent and 25 percent for virtually all taxable income, ensuring that over 99 percent
of all taxpayers face maximum rates of 25 percent or less. The new 10% rate covers income that used to be taxed at the 10% and 15% rates. All taxable income above that is taxed at 25%. There is a 10% surtax for very high incomes.
2) Raises the standard deduction to $11,000 for singles, $22,000 for married couples. Eliminates the individual tax exemptions. For most people this is basically a wash with no major impact. Just simplifies the return.
3) Expands the child tax credit to $1500.
4) Simplifies the Earned Income Credit for low income earners. Pays it to them directly as a reduction of payroll taxes instead of having to file a tax return to collect it.
5) Preserves most of the most popular current tax credits/deductions for college expenses.
6) Keeps IRA/401k the same for most people, reduces the deduction for high earners that contribute more than $8700 per year.
7) Leaves the home mortgage deduction in place for most people and the deduction for employer paid health insurance.
8) Revamps business taxes by lowering overall rates but closing some loopholes.
There are more details, but the overall bottom line is lower tax rates in exchange for eliminating a number of existing deductions and credits. The major increase in the standard deduction would offset most or all of the loss of specific deductions for most people. High income earners would pay more taxes.
You would think a major tax reform bill might be something that could lead to monetary system change, but not in this case. Any bill like this is just a tweaking of the present system. Most taxpayers would not see a major change in tax paid, but it would simplify filing the return. None of this would lead to a major monetary system change even if it were passed. Regarding that, both political parties have already said no plan would pass until 2015 at the earliest. For sure any plan passed would be different than this one after haggling and compromises. Special interests will fight over it.
The plan claims it would stimulate real GDP growth and jobs. If true, it could reduce the annual Federal deficit and stall off major monetary system changes. As with most things like this, it is really not possible to know if the benefits claimed would actually be realized.