I am not making this up. Last week House Ways & Means Committee Chairman Representative Charles Rangel (D-NY) introduced H.R. 3970. This bill has been dubbed the "mother of all tax bills", or "mother" for short, because it would be the biggest proposed re-write of the tax code since 1986. If you are a glutton for punishment, you can read the entire 129 page bill yourself but here are some of the highlights. (For the record, I did not read the bill myself but this is what I have collected from various sources).
There are four major sections to the bill. The first deals with Individual Tax Relief which offers an increase in the standard deduction, expands the earned income credit, and increases the amount of the refundable child tax that can be claimed. Perhaps the biggest component of the bill is the repeal of the alternative minimum tax (AMT) on individuals. Before the celebrations begin the bill actually imposes a "replacement tax" which would hit fewer taxpayers, but the ones it does affect it would be expensive. The repeal of AMT is expected to cost $795.66 Billion over 10 years, but the replacement tax generates $831.70 Billion over the same timeframe.
The second section is titled Other Individual Tax Reforms and is mostly small nit picky stuff. The only areas I found of interest was a clarification that shareholder-employees of service S-corporations and partner-employees of service partnerships are subject to self-employment tax (I never knew this wasn't clear to begin with) and that brokers would be required to report cost basis on publicly traded securities (good idea).
The meat of the bill is the third section of One-Year Extenders which do not really change anything in the tax code, it just continues some provisions which are already there but are scheduled to expire.
The fourth section is Corporate Tax Reform. While it reduces the top corporate tax bracket from 35% to 30.5%, this $363.84 Billion cut will be paid for by a variety of changes to corporate tax rules. In other words, the cut looks good in a headline but really just shifts the liability around. The taxes are still there.
It looks like this is politics at its worst as usual. The "mother bill" will likely not receive any Congressional attention until 2008 when it will mostly be rhetoric ammunition during an election year. The exception is the third section of extenders which will probably fly through Congress. Keep in mind, that section is really just "more of the same". The AMT relief in that section just maintains the trigger point for AMT at current levels.
I find it interestingly peculiar that there is absolutely no mention that I have seen of Estate and Transfer taxes in this bill. Our current Estate Tax is scheduled for repeal in 2010, but then in 2011 the law which repeals it expires and we are back to a burdensome tax as it existed in the late 1990's.
I could never be a politician. I am far too efficient.
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