Leading Democrats, Republicans Split on House GOP Proposed Tax Reform

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House Speaker Nancy Pelosi had hoped to hold a vote on the bipartisan infrastructure bill this week but the legislation, along with the reconciliation bill, may now be taken up next week.

WASHINGTON – The House GOP blueprint for tax reform released Friday sparked mixed reactions in Congress, with leading Democrats criticizing its lack of detail and Republicans lauding its proposed pro-growth efforts through limits on deductions, exclusions and credits in the current tax code.

House Minority Leader Nancy Pelosi, D-Calif., called the GOP's "A Better Way" blueprint a "Wrong Way" reform that she said would "explode" the current deficit and would unfairly benefit the wealthy.

"Republicans' Wrong Way tax agenda would ransack our investments in jobs, infrastructure, education and the future of our nation," Pelosi said. "We should be subjecting our tax expenditures to harsh scrutiny, keeping those that promote growth and strengthen the middle class, and ending those special interest handouts that do nothing but increase the deficit.  Republicans' Wrong Way agenda only takes us further from restoring fairness to our tax code."

House Democratic Whip. Steny Hoyer, D-Md., said while Democrats share a desire to simplify the tax code, the current blueprint is an attempt to "repackage failed partisan policies," and does not include ¬¬-detailed explanations of how introduced cuts would be funded.

"It is long on descriptions of our challenges and extremely short on any ideas of how to address them," Hoyer said.

The blueprint would make several significant changes to the current tax code, including a reduction of the corporate income tax rate to 20% and paring the current seven-bracket individual income tax rate to three brackets with a top rate of 33%.

It would also eliminate both the death tax and the Alternative Minimum Tax for both corporations and individuals. The Internal Revenue Service would be reorganized into three independent units and  a new commissioner would be installed. Taxpayers would use a postcard system to file returns under the redesign.

Rep. Devin Nunes, R-Calif. put his support behind the blueprint, which Republicans are hoping will be the first major tax simplification signed into law in 30 years. Nunes said if enacted, the proposed plan would create jobs, prevent U.S. companies from relocating overseas and expand the economy.

"These reforms would revolutionize the tax code so that it would help propel the economy forward instead of hindering it at every turn," said Nunes, a member of the House Ways and Means Committee.

The proposed plan also received support from Rep. Adrian Smith, R-Neb., another Ways and Means Committee member.

Though the 35-page plan does not mention municipal bonds directly, market participants have expressed concern that their tax-exempt standing may be in jeopardy because of the vague nature of the Republicans' blueprint.

Market groups and other muni proponents have called on lawmakers to preserve their tax-exempt status because of munis' critical importance to funding local infrastructure and municipalities.

Rep. Kevin Brady, who chairs both the House Ways and Means Committee and its Task Force on Tax Reform, said in a news conference Friday that the plan will be amended and fleshed out in the coming months ahead of formal tax legislation Republicans hope to introduce in 2017. A more detailed draft will include comments and recommendations from lobbyists, tax groups and taxpayers, Brady said.

Brady's task force was formed earlier this year to draft legislation that would limit deductions, exclusions and credits as well as close existing loopholes in the current tax code.

In a letter sent Friday to Brady and House Speaker Rep. Paul Ryan, R-Wis., a coalition of ten conservative groups including The National Taxpayers Union and Americans for Tax Reform said the plan's proposed cut of the top tax rate on long-term capital gains and qualified dividends to 16.5% from 23.8% would translate to pro-growth reform.

The groups said amending the current "uncompetitive and unfair" tax code was a pressing matter.

"Given the urgency of this problem, we believe it is vital that pro-growth tax reform is passed within the first hundred days of the next Congress," the groups wrote.

The last major tax reform bill signed into law was the Tax Reform Act of 1986, which reduced the number of deductions and individual income tax brackets and lowered the top tax rate to 28%. It also raised the capital gains tax rate to 28% from 20% while creating a broader base.

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