House Republicans Release Tax Strategy

By Kathleen Coulombe, Senior Advisor, Government Relations Jul 15, 2016

On June 24, House Republicans unveiled their tax plan as part of Chairman Paul Ryan's (WI-R) direction to develop a policy agenda focused on six key policy areas. The objectives of the tax plan include fueling job creation, simplifying the tax code and revamping the Internal Revenue Service (IRS).

The tax proposal would amend both individual and corporate tax rates and simplify the tax filing process. The seven brackets for individual filers would be collapsed to three, with the top bracket at 33%; corporations would see a top tax bracket of 20%.

Additionally, the plan consolidates a variety of deductions for individual filers. The basic standard deduction, additional standard deduction, and personal exemption for taxpayer and spouse would be collapsed into one deduction: the "larger standard deduction." Two provisions, the mortgage tax deduction and the charitable giving deduction, would remain, while the plan would eliminate the estate and death taxes, as well as the tax on business investments.

The proposal would also restructure and refocus the Internal Revenue Code in an effort to make it customer-centric. Several provisions have the potential to impact the workplace, including:

  • Simplification of Higher Education Tax Credits: The Ways and Means Committee to review and consolidate many of the higher education tax credits, including employer-provided educational assistance benefits under Internal Revenue Code Section 127.Section 127  provides an exclusion from tax  for employers that provide educational assistance to their employees.

  • Review of Tax Incentives for Retirement Savings: The Ways and Means Committee will review current tax incentives for employer-provided retirement and pension plans and propose changes to the  incentives.

  • Taxation of Employer-Sponsored Benefits: The Tax Task Force deferred to the Health Care Task Force regarding tax exclusions for employers related to health care benefits and retirement benefits. As an aside, the Health Care Task Force recommended capping exclusions for health care benefits, but has not identified what that cap would be. Employer exclusion for health care and retirement benefits is the largest loss to the U.S. Treasury and will undoubtedly be considered as a revenue stream in tax reform efforts.

  • Expansion of Retirement Savings Options: The Ways and Means Committee will examine current retirement and savings options and the creation of a Universal Savings Account, which individuals could contribute to and withdraw assets from at any time without penalty. ​

SHRM, as well as the SHRM-led Coalition to Protect Retirement, will continue to advocate throughout the tax-reform process, reiterating the importance of preserving employer-provided benefits. For up-to-date information regarding taxes and benefits, please visit SHRM's Tax and Benefits resource page

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