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When lawmakers return to Washington after a two-week recess, they will begin promoting two very different visions of tax reform. The plans call for individual and business rate cuts, small business tax relief, and the so-called Buffett Rule.

The Stage Is Set For Tax Reform Debate

  • 4/11/2012

The Stage Is Set For Tax Reform Debate

Democrats and Republicans have begun a two-week recess with lawmakers returning home to promote very different visions of tax reform. Before recessing, the House passed a Republican budget blueprint calling for individual and business rate cuts, the Ways and Means Committee approved a GOP small business tax package, and the Senate prepared to debate the so-called Buffett Rule. Congress also approved a short-term extension of federal transportation excise taxes and funding.

GOP budget

The House voted 228 to 191 to approve the GOP budget blueprint on March 29, 2012. The GOP budget proposes to cut the corporate tax rate to 25 percent and shift the U.S. to a territorial tax system, reduce the individual tax rates to 10 and 25 percent, and eliminate unspecified tax preferences.

Comment: Sen. Rob Portman, R-Ohio, recently said that he is developing a bipartisan legislative proposal to overhaul corporate taxation and reduce the U.S. corporate tax rate to 25 percent. Portman said his proposal would be revenue-neutral by reducing tax preferences.

Buffett Rule

Democratic leaders have indicated that the Senate will vote on the Paying a Fair Share Act (known as the Buffett Rule), which would subject taxpayers earning over $2 million to a 30 percent minimum federal tax rate. The vote is expected to be on April 16. The tax would be phased-in for taxpayers with incomes between $1 million and $2 million.

Small businesses

On March 28, 2012, the Ways and Means Committee approved the Small Business Tax Cut Act along party lines. The GOP bill would allow a deduction for 20 percent of qualified domestic business income of the taxpayer for the tax year, or taxable income for the tax year, whichever is less. However, a taxpayer's deduction for any tax year could not exceed 50 percent of certain W-2 wages of the qualified small business.

In the Senate, the Democratic bill would provide a 10 percent income tax credit on new payroll (through either hiring or increased wages) added in 2012. The maximum increase in eligible wages would be capped at $5 million per employer, and the amount of the credit would be capped at $500,000. The Senate bill would also extend the 100 percent bonus depreciation through the end of 2012.


Before recessing, the House and Senate approved an extension of federal transportation excise taxes and funding, which President Obama signed on March 30, 2012. The extension was necessary because Congress failed to pass a comprehensive transportation bill before the March 30, 2012, expiration of transportation tax authority and funding.

Comment: The Senate-passed transportation bill (Sen 1813) has become bogged down in the House. Some House members are opposed to its nontransportation tax provisions

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