House GOP tax plan hits Senate wall

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WASHINGTON -- House Republicans haven't even officially unveiled their massive plan to overhaul the tax code and the top Senate Republican is already pronouncing it dead.

Senate Minority Leader Mitch McConnell, R-Ky., said Tuesday that he sees no hope for enacting tax overhaul legislation this year. He blamed Democrats for trying to use the issue to raise revenue by $1 trillion. Mr. McConnell said the object of overhauling the tax code should be making the nation more competitive, not raising more money for the government.

Mr. McConnell's remarks came a day before the Republican chairman of the tax-writing House Ways and Means Committee, Michigan Rep. Dave Camp, was to unveil a massive tax plan three years in the making.

Mr. Camp's plan would cut income tax rates but impose a new surtax on some high-income families, said a GOP aide who wasn't authorized to discuss the plan by name and spoke on condition of anonymity. The top income tax rate for most families would be lowered from 39.6 percent to 25 percent. But the plan would impose a new 10 percent surtax on some earned income above about $450,000. The new surtax would not apply to capital gains or dividends, sparing many of the super-rich, who make the bulk of their money from investments.

The plan had little chance of becoming law in this year, even before Mr. McConnell's remarks. But it could become a political document for House Republicans to show what they stand for -- and for Democrats to attack -- as the midterm elections approach in November.

House Republicans have touted the upcoming plan as a major tax code overhaul that would dramatically lower tax rates for individuals and corporations, but recoup the revenue by eliminating or reducing popular tax breaks. Overall, the plan is designed to raise about the same amount of tax revenue as the current system, though the GOP proposal would be much simpler.

"Today's tax code is too costly, too complex and too time-consuming," Mr. Camp's office said in a statement Tuesday. "America needs a tax code that will spur economic growth, create jobs and put money back in the pockets of hardworking taxpayers."

It is an important political point for Republicans that the plan is not seen as a big giveaway to the rich. The new surtax on high-paid workers would partially offset the massive rate cut. But the plan would have to raise other taxes on the rich to avoid shifting more of the tax burden to middle- and low-income families.

The issue of whether to increase overall tax revenue is a major sticking point among Republicans and Democrats. Most Republicans in Congress adamantly oppose anything that looks like a tax increase, while Democratic leaders insist that any attempt to overhaul the tax code raise additional revenue.

Mr. Camp has been working to overhaul the entire tax code for about three years, ever since he became chairman of the powerful tax-writing committee. He has steadfastly refused to say which tax breaks he would eliminate to pay for lower overall rates. But Mr. Camp is expected to answer those tough questions today, when he unveils his plan. He is betting that the promise of lower rates and a simpler tax system will shield House Republicans from attacks for proposing to cut popular deductions, credits and exemptions.

Mr. Camp has worked with dozens of House Republicans to build support for his plan, though it is unclear if it will ever come before the full House for a vote. He wanted to unveil the plan last year and hold a committee vote. But House GOP leaders put on the brakes, not wanting to distract voters from the problem-plagued rollout of the president's health care law.


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