Tax Code Overhaul: What the Proposal Holds

Posted on March 3, 2023

Tax Code Overhaul: What the Proposal Holds

Almost everyone would agree that the tax code needs an overhaul, but an overhaul of the tax code will be as complex as the tax code itself. The tax reform proposal by the House of Ways and Means has suggested many changes to the tax code with the aim of making the tax code simpler and driving economic growth.

“Tax reform is always tough because every tax preference has a constituency that will fight for its survival,” says John Pitney, an expert on Congress who teaches at Claremont McKenna College in Claremont, California. Even though tax reform is not simple, the proposal by the House of Ways and Means is the beginning in the renewal of the tax code. But the proposal is unlikely to be discussed in an election year. “In general terms, it’s a pretty risky exercise” to make public something this detailed that can be shot at in an election year, says Joseph Minarik, chief economist in the White House Office of Management and Budget during the Clinton administration.

The proposal suggests reducing the number of individual tax brackets from seven to two. The two tax brackets are 10 percent tax rate and the 25 percent tax rate. Currently, the top tax rate is 39.6 percent.

The proposal calls for the reduction in the corporate tax rate from the current 35 percent to 25 percent. Also, 40 percent of the long-term capital gains and dividends will be exempt from tax. The undercurrent of the suggested changes in the proposal is to make the tax code fairer and simpler.

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