By: Dr. Mark Lutschaunig, director, Governmental Relations Division
Last month, House Ways and Means Committee Chairman David Camp (R-Mich.) released the latest draft of his tax proposal, “Tax Reform Act of 2014.” The draft would reduce the number of tax brackets, eliminate some popular tax deductions, and cut tax rates.
According to Camp:
“It is no secret that Americans are struggling. Far too many families haven’t seen a pay raise in years. Many have lost hope and stopped looking for a job. And too many kids coming out of college are buried under a mountain of debt and have few prospects for a good-paying career. We’ve already lost a decade, and before we lose a generation, Washington needs to wake up to this reality and start offering concrete solutions and debating real policies that strengthen the economy and help hardworking taxpayers. Tax reform is one way we can do that.”
Under Camp’s proposal, the top six tax rates under current law would be reduced to one bracket with a 25 percent tax rate, and the lowest two tax rates would be reduced to one bracket with a 10 percent tax rate. For corporate taxpayers, the current four tax brackets would be reduced to one bracket with a 25 percent tax rate.
Some popular deductions would be decreased or eliminated under the Camp proposal. For the individual taxpayer, the Mortgage-Interest Deduction and the Earned-Income Tax Credit would be decreased, while the Home Upgrade, Medical Expense and the State and Local Tax deductions would be eliminated. However, the Individual Standard Deduction and the Child Tax Credit would be increased under the proposal. The new standard deduction for individuals would be $11,000 and for couples would be $22,000, and the Child Tax Credit would increase to $1,500 per child. Both deductions would be adjusted for inflation going forward. Camp’s plan also repeals the Alternative Minimum Tax.
In its report on the Tax Reform Act of 2014, the independent, nonpartisan Joint Committee on Taxation (JCT) stated that the legislation “does not significantly change the share of taxes paid by or the average tax rate for each income cohort reported by the JCT.” An income cohort is a group of individuals with similar incomes. However, the JCT acknowledges that each income cohort is a heterogeneous group—so the impact on AVMA’s member veterinarians may be different depending on their circumstances.
Next month, we will look at how the new proposal impacts students. Stay tuned.