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For the past few years, Rep. Dave Camp (R-Mich.) has been working on a vast overhaul of the U.S. tax system to make it less complicated and better for economic growth. This week, the House Ways and Means Committee unveiled the efforts of his work in what's being called the Camp Plan. Read on for more on the Camp Plan's proposals and what it would mean for you.

Simpler tax system
The current U.S. tax code runs a mind-boggling 70,000 pages long. The Camp Plan simplifies and repeals more than 220 sections of the code, cutting the whole thing by 25%. The biggest proposed cuts to the tax code include:

  • The repeal of the Alternative Minimum Tax, or AMT.
  • The repeal of the deduction for state and local tax payments.
  • Simpler tax rates for capital gains and dividends.
  • The repeal of deductions for personal exemptions.
  • A simpler Earned Income Tax Credit.
  • The combination of education tax credits from four programs to one.
  • The end of the traditional IRA and the move to a Roth IRA accessible to everyone.
  • A cap on mortgage interest deductions on mortgage indebtedness above $500,000.

For these cuts in the tax code, the plan proposes a few big changes for individuals.

Larger standard deduction and child tax credit
Under current tax law, taxpayers get a standard deduction of $6,100 for individuals, $8,950 for heads of households, and $12,200 for married individuals filing a joint return. The Camp Plan would increase the standard deduction to $11,000 for individuals and $22,000 for joint filers, though it should be noted that the deduction would phase out for earnings above $358,750 and $517,500, respectively. The child tax credit would be increased 50% from $1,000 per child to $1,500 per child and would be indexed to inflation.

New lower rates
In addition to the increase in the standard deduction, the Camp Plan proposes new lower tax rates for many individuals.

2015 Estimated Income Brackets for Single Filers

2015 Estimated Income Brackets for Joint Filers

Current Tax Rate

Camp Plan Tax Rate





























Source: Joint Committee on Taxation.  

The Camp Plan simplifies the tax system from the current seven brackets and the AMT, to just three brackets of 10%, 25%, and 35%.

Investment income
Under the Camp Plan, short-term capital gains would still be taxed as ordinary income. Long-term capital gains and dividends would be taxed at 60% of the taxpayer's marginal income rate. So if you were in the 35% bracket, your long-term capital gains rate would be 21%, not including the additional 3.8% Net Investment Income Tax on incomes above $200,000. So in all, your rate would be 24.8%.

New corporate tax rates
The U.S. currently has the highest corporate tax rate in the industrialized world. The Camp Plan proposes to significantly change that with a new proposed corporate tax rate of 25% and a modernized foreign profits taxation system. You can read a synopsis of the proposed corporate tax system here.

Faster economic growth
Overall, the Joint Committee on Taxation expects that the Camp Plan would be a net positive to the economy, with the simplified and lower tax rates yielding 1.5% more GDP growth annually and an additional $700 billion in tax revenue over the next decade. Even better, for a variety of reasons, Camp thinks these numbers are low and will be revised upward upon further review, meaning more growth for the economy.

Foolish bottom line
These changes to the corporate tax system would be a net positive if adopted, but they shouldn't change your investing strategy. When it comes to your investments, you should continue to educate yourself, find great companies, and invest for the long term, no matter what happens in Washington D.C.

Of course, it's anybody's guess at this point whether the bill will pass and, if it does, what will change. But one thing is certain: In both the public and private sectors, governance functions best when stakeholders educate themselves, take an active interest in what's going on, and hold their representatives accountable. So take a moment to let your representative know what you think of the Camp Plan or write directly to the House Ways and Means Committee at

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Find Dan Dzombak on Twitter, @DanDzombak, or on his Facebook page, DanDzombak. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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