An Overview of Recent Tax Reform Proposals (CRS Report for Congress)
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| Release Date |
Feb. 28, 2017 |
| Report Number |
R44771 |
| Report Type |
Report |
| Authors |
Keightley, Mark P. |
| Source Agency |
Congressional Research Service |
Summary:
Many agree that the U.S. tax system is in need of reform. Congress continues to explore ways to
make the U.S. tax system simpler, fairer, and more efficient. In doing so, lawmakers confront
challenges in identifying and enacting policies, including consideration of competing proposals
and differing priorities. To assist Congress as it continues to debate the intricacies of tax reform,
this report provides a review of legislative tax reform proposals introduced since the 113th
Congress.
Although no comprehensive tax reforms have been introduced into legislation yet in the 115th
Congress, two 2016 reform proposals appear to be at the forefront of current congressional
debates—the House GOP’s “A Better Way” tax reform proposal, released in June 2016, and
President Trump’s campaign reform proposal, released in September 2016. As with most recent
tax reform proposals, both of these plans call for lower tax rates coupled with a broader tax base.
In either case, numerous technical details would need to be addressed before either plan could be
formulated into legislation.
Several proposals have already been introduced in the 115th Congress to replace the current
income tax system. The Fair Tax Act of 2017 (H.R. 25/S. 18) would repeal the individual income
tax, the corporate income tax, all payroll taxes, the self-employment tax, and the estate and gift
taxes. These taxes would be effectively replaced with a 23% (tax-inclusive, meaning that the rate
is a proportion of the after-tax rather than the pre-tax value) national retail sales tax. The Tax
Code Termination Act (H.R. 29) would terminate the Internal Revenue Code (IRC) and declares
that its replacement meet several criteria regarding simplicity, fairness, and efficiency. Both of
these proposals have been introduced in previous Congresses.
In the 114th Congress, no comprehensive proposals to reform the individual and corporate income
tax systems were introduced. There were, however, reform proposals to replace the income tax
with an alternative system or abolish the current system altogether.
In the 113th Congress, then-chairman of the House Committee on Ways and Means Dave Camp
introduced the Tax Reform Act of 2014 (H.R. 1). This legislative proposal was preceded by
several tax reform discussion drafts, the first of which was introduced during the 112th Congress.
The Tax Reform Act of 2014 would have made substantial changes to the current federal tax
system, modifying individual, corporate, and business income taxes, as well as the tax treatment
of multinational corporations. The proposal would also have made a number of changes related to
the treatment of tax-exempt entities, tax administration and compliance, and excise taxes.
This report will be updated as warranted by legislative changes.
