With an ambitious plan that's short on details, House Republicans are calling for big cuts in corporate and individual income tax rates, financed by eliminating scores of credits, deductions and exemptions, many enjoyed by millions of taxpayers.
Their 10-year budget sets an aggressive goal of reducing the top corporate and individual tax rates from 35 percent to 25 percent.
Which tax breaks would be eliminated? Those hard choices wouldn't come for months _ maybe not for years. Congress and the Obama administration would have to get serious first about overhauling the nation's tax code.
Business groups, nonetheless, applauded the proposal unveiled Tuesday by House Budget Committee Chairman Paul Ryan, R-Wis. Democrats called it a giveaway to the rich. Tax experts said it would be difficult to achieve, especially since Ryan's plan also calls for reducing federal spending by about $5 trillion over the next decade.
Ryan said the tax code is littered with generous tax breaks that could be eliminated to finance lower tax rates for everyone. He envisions a tax system with fewer brackets and simpler rules. He has ruled out an overall tax increase, though experts say any plan to overhaul the tax system is likely to produce winners and losers. Some would pay more, others less.
Ryan would rescind all tax increases in both the new health care law and in President Barack Obama's proposed 2012 budget. He would extend Bush-era tax cuts for taxpayers at every income level, including the wealthy. He rejects Obama's call to increase taxes on oil and natural gas companies.
In all, Ryan's budget calls for collecting about $1.8 trillion less in taxes over the next decade than the budget Obama submitted in February.
"Simply put, the code is too costly and too burdensome," Ryan wrote in his proposal. "The code is also patently unfair, as many of the deductions and preferences in the system _ which serve to narrow the tax base _ are mainly used by a relatively small class of mostly higher-income individuals."
The problem, according to tax experts, is that every deduction, exemption and credit, every layer of complexity, is important to somebody. In some cases, millions of somebodies. Ryan's budget doesn't single out any tax break for elimination.
"You can't get there without going after things like the deduction for mortgage interest, the deduction for state income taxes, the exclusion for employer-provided health care benefits," said Clint Stretch, a tax expert at Deloitte Tax LLP.
Trying to end any of those big-ticket items would set off a monumental fight in Congress, even if it resulted in lower tax rates for everyone.
In 2009, nearly 35 million taxpayers got a tax break for paying interest on their home mortgages, and nearly 36 million taxpayers took the $1,000-per-child tax credit. About 41 million households reduced their federal income taxes by deducting state and local income and sales taxes.
Ryan's goal for a top tax rate of 25 percent mirrors a proposal by Rep. Dave Camp, R-Mich., chairman of the tax-writing House Ways and Means Committee. Camp is heading up GOP efforts to overhaul the tax code in the House, a process he acknowledges could take years.
Obama has called for revamping corporate taxes and has said he would join congressional efforts to overhaul individual taxes. But so far the White House and Treasury Department haven't dedicated the political resources necessary to advance such a measure.
The corporate income tax rate of 35 percent is among the highest in the industrialized world. Few corporations pay anything close to that because of all the credits and deductions available.
The U.S. Chamber of Commerce praised Ryan's efforts at "reforming our nation's broken tax code." The White House complained his plan "cuts taxes for millionaires and special interests while placing a greater burden on seniors who depend on Medicare or live in nursing homes."
Eugene Steuerle, a former Treasury official who worked on the last tax reform package that passed Congress, in 1986, credited Ryan for offering a plan, even if it lacks details.
"At least he's putting out some major positions to consider, when everybody else is scared to death to do it," Steuerle said.