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News : US Economy Last Updated: Feb 27, 2014 - 9:02 AM

Corporate Tax 2014: Tax reform proposals released in Washington
By Michael Hennigan, Finfacts founder and editor
Feb 27, 2014 - 9:00 AM

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US tax code compared with the Bible

Corporate Tax 2014: Dave Camp, the Republican chairman of the tax-writing House Ways and Means Committee, released a sweeping tax-overhaul plan on Wednesday, which triggered a flood of criticism. When asked about the proposal’s details, Republican House Speaker John Boehner replied, “Blah, blah, blah, blah” - -  that was code for its chances of success in an election year.

The last big tax reform was in 1986 and Senator Bill Bradley, one of the architects wrote in 2009: "In 1986, before President Ronald Reagan, a Republican Senate and a Democratic House succeeded in passing landmark tax reform, Washington insiders and the press predicted — as they are doing now — that it would never happen. There are lessons from the 1986 legislative experience that can be applied to health care reform today." 

The Wall Street Journal says the heart of the Camp plan would collapse today's seven income tax brackets into three, with about 99% of taxpayers paying 10% or 25%. The top statutory marginal rate would fall to 35% from 39.6% for individuals earning wage income over $400,000 ($450,000 for joint filers).

The corporate tax rate would fall to 25% from 35%, in a similar trade of a lower rate and simplicity for fewer loopholes. US companies are now subject to the highest combined federal-state tax rate in the developed world, which has depressed hiring and wages and driven capital and talent offshore. Camp's plan would make US business more competitive by cutting the rate closer to the world average.

The plan would impose a levy on big banks.

“A tax that singles out one specific industry is utterly inconsistent with the fundamental goals of tax reform to lower rates, broaden the base, and remove industry-specific treatments,” said Rob Nichols, president of the Financial Services Forum, which represents big banks. Meanwhile housing groups criticised a reduction in the limit on the mortgage interest deduction from $1m to $500,000 and the elimination of a deduction for state and local taxes.

Also on Wednesday, Brady Dougan, Credit Suisse’s chief executive, who is a US citizen, rejected allegations that the Swiss bank was a willing accomplice in US tax evasion, blaming instead a small group of its private bankers for helping Americans conceal their wealth.

Dougan told US senators that Credit Suisse only uncovered “scattered evidence” of improper conduct, and its top managers were not aware that a small group of Swiss-based private bankers had helped US customers hide income and assets.

“We deeply regret that – despite the industry-leading compliance measures we have put in place – before 2009, some Credit Suisse private bankers appear to have violated US law,” Dougan said in prepared remarks issued before his appearance later on Wednesday in front of a US Senate subcommittee on offshore tax evasion.

In Brussels Wednesday, plans to make companies reveal how much tax they pay country by country were abandoned as Germany and the UK argued in the European Parliament that the OECD is working on new tax rules for multinationals.

Reuters reports taht one British diplomat, who asked not to be named, defended his country's stance by pointing out that measures to set new standards for companies are already being considered by the Organisation for Economic Cooperation and Development.

Michel Barnier, the European commissioner in charge of regulation, expressed his disappointment but said that he hoped the tax issue could be taken forward at a later date.

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