(Corrects Camp’s home state, paragraph 2)
By Kim Dixon
WASHINGTON, March 11 (Reuters) – The top tax law writer in
the U.S. House of Representatives will pitch a plan to revamp
the taxation of many small businesses, and some large ones,on
Tuesday in his latest bid to rewrite the tax code.
Dave Camp, chairman of the House Ways and Means Committee,
has said he wants to pass tax reform legislation this year. But
the Michigan Republican faces an uphill climb with his party and
the Democrats deeply split on tax-and-spending policies.
Camp’s plan, not yet released, will seek to overhaul small
business taxes, but also cover businesses not organized as
traditional corporations, often known as “pass-throughs.”
These businesses include structures such as partnerships, in
which profits are not retained by the business or distributed to
corporate shareholders, but rather, are passed through to the
partners, who are taxed on that income. The top U.S. income tax
rate since the beginning of the year is 39.6 percent.
That is higher, by contrast, than the top corporate income
tax rate of 35 percent, though many large corporations do not
pay that rate thanks to tax breaks for selected industries.
Pass-throughs range from Mom-and-Pop storefronts to global
hedge funds and law firms. About 53 percent of the $1.3 trillion
in total business income in this category will be reported in
2013 on returns of taxpayers earning at least $200,000,
according to the nonpartisan congressional Joint Committee on
Taxation.
The two parties have sparred over small business taxes.
Republicans steadfastly oppose higher rates on wealthier
individuals, whom Republicans call job creators. Obama and most
other Democrats repeatedly have proposed raising the top tax
rates paid by the wealthy.
The Democrats won a key round in this fight in January with
a deal ending the ‘fiscal cliff’ stand-off that raised the top
tax rate on individual income above $400,000.
Democrats want more new tax revenue, presenting a major
hurdle to fundamental tax reform, given Republicans’ opposition
to this, as highlighted in comments by Camp’s Republican
counterpart in the Senate on Monday.
“It has become more and more common for my friends on the
other side of the aisle to argue in favor of simply eliminating
so-called tax loopholes in order to raise revenue, and then
calling that process quote-unquote tax reform,” Orrin Hatch, the
top Republican on the Senate Finance Committee said on the
Senate floor.
The top Democratic taxwriter, Senator Max Baucus, is also
pitching tax reform, but has had disagreements with Senate
leaders over the details.
Camp’s draft is likely to include some non-controversial
measures, like making permanent a tax break for writing down the
cost of equipment for certain business.
The Obama administration has floated the idea of forcing
large businesses now taxed as pass-throughs to file as
corporations instead, something Republicans have resisted.
(Reporting by Kim Dixon; Editing by Leslie Gevirtz)
