If Democratic leaders only extend the Bush tax cuts affecting the middle class, as is planned, the current system would raise more revenue than the senators' proposal.
The Tax Center predicts that under the Wyden-Gregg proposal individual income and payroll tax would increase and corporate taxes would decrease. The proposal would also be more progressive, with after-tax incomes declining on average for the top 20 percent of taxpayers and increasing on average for the lower 80 percent.
Earlier this year, Wyden and Gregg introduced the Bipartisan Tax Fairness and Simplification Act of 2010. Among other things, their proposal for individuals condenses the existing tax brackets into 3 rates — 15, 25, and 35 percent — increases the standard deduction and excludes 35 percent of certain capital gains and dividends from taxation. It also repeals the Alternative Minimum Tax (AMT).
On the corporate side, the proposal reduces tax rates that top out at 35 percent to a flat 24 percent.
The senator's bill also legalizes and taxes Internet gambling.
Congress is not expected to take up tax reform this year, but when it does the bill is expected to be vetted by tax leaders.