On October 25, 2007, Chairman Charles B. Rangel of the House Ways and Means Committee announced his tax revision proposal, H.R. 3970 , the Tax Reduction and Tax Reform Act of 2007. The most significant provisions, measured by revenue effect, were a revision in 2007 and subsequent repeal of the individual alternative minimum tax (AMT) and an additional tax on high-income individuals. The proposal also contained tax cuts for lower-income taxpayers, some tax increases on high-income individuals, several base broadening provisions, one-year extensions of a number of expiring tax provisions, and a corporate and business revision package that included rate reduction and base broadening. Finally the proposal reduces the top corporate tax rate from 35% to 30.5%, with the change offset by a series of base broadening provisions, with the most important ones repealing the domestic production activities deduction, a set of international tax provisions, and two inventory revisions. The objective of the AMT was originally to impose taxes on higher-income individuals who were otherwise paying low taxes because of tax preferences (i.e., tax benefits). 3970 contains three provisions targeted at lower-income individuals that cost $86 billion overall: an increase in the standard deduction; an increase in the earned income credit for families without children; and an increase in the refundability of the child credit. Tax Increases on High-Income Individuals

Three revenue raising provisions apply to high-income individuals and roughly offset the losses associated with the repeal of the AMT: a tax on high adjusted gross incomes, a restoration of provisions that phase out personal exemptions and itemized deductions for high-income taxpayers, and an increase in the floor for miscellaneous itemized deductions. It raises $7.1 billion. Distributional Effects

The package of individual changes in the individual tax portion of the bill would be roughly revenue neutral (a slight revenue loss) but would redistribute tax burdens. In keeping with this growth, there are 37 extenders in the bill, which cost a total of $21 billion over a 10-year period. Many of these provisions have a negligible revenue effect. The major tax reduction is a reduced corporate tax rate (from 35% to 30.5%) that costs $364 billion over the 10-year period. It costs $20.5 billion over 10 years.
On October 25, 2007, Chairman Charles B. Rangel of the House Ways and Means Committee announced his tax revision proposal, H.R. 3970, the Tax Reduction and Tax Reform Act of 2007. One of the objectives of the plan was to address the problem with the individual alternative minimum tax (AMT), a provision that was originally aimed at high-income taxpayers' preferences but, because it was not indexed, is increasingly reaching upper middle class taxpayers. The most significant provisions, measured by revenue effect, were a revision in 2007 and subsequent repeal of the AMT (costing $845 billion over 10 years) and an additional tax on high-income individuals (raising $832 billion).
The plan also contained other tax revisions for individuals, to produce a roughly revenue neutral overall individual tax revision. Taxes were reduced for lower-income individuals by $86 billion, including an increase in the standard deduction, an increase in the earned income tax credit for families without children, and an increase in the refundability of the child credit. Taxes were increased for higher-income individuals through a restoration of the phaseout of personal exemptions and itemized deductions and a restriction on miscellaneous itemized deductions, for a total gain of $38 billion. These general provisions resulted in tax reductions for over 95% of taxpayers, with increases in tax liability at very high income levels. The individual section also contained base broadening provisions, raising $61 billion. The most important of these were increased taxes on managers of hedge fund and other investments, who tend to have high incomes.
The proposal also extended a number of expiring tax provisions for an additional year at a cost of $21 billion.
The plan also included a corporate/business package that cut the corporate tax rate from 35% to 30.5% (costing $364 billion over 10 years) and made an increased expensing allowance for small business equipment permanent (a $21 billion cost). Offsetting these losses were revenue raisers that resulted in a small net gain of $14 billion for this portion of the plan. The major revenue raising provisions were a repeal of the domestic production activity deduction, increased taxes for multinational corporations, and changes in inventory accounting.
Overall, the bill would lose $53.8 billion over five years and $7.5 billion over 10 years; thus, over the ten-year period it is close to revenue neutral as the loss is only 3/100 of 1% of income tax revenues.