Key elements of the tax code rewrite proposed yesterday by House Ways & Means Committee Chair Dave Camp (R-MI) came straight from the playbook of the 1986 Tax Reform Act. The most surprising: As in 1986, it would pay for individual tax cuts by boosting taxes on corporations—at least temporarily. Hard to believe, perhaps, but true. Camp would cut individual income taxes by nearly $590 billion over the ten-year budget window. And he’d raise business tax revenue by about $520 billion over the same period, not counting the bank tax and other changes in excise taxes. But therein lies the rub: Much of the new business tax revenue is temporary and will disappear after a decade. What’s going on here? Remember, the House GOP leadership required Camp to reduce the corporate tax rate to 25 percent from the current 35 percent. He did it, but phased the rate reduction in over five years. He’d also repeal the corporate alternative minimum tax, and make permanent two tax cuts that are traditionally included in a package known as “tax extenders” (increased small business expensing and the R&E credit). In total, these changes would reduce corporate revenues by nearly $880 billion through 2024. The plan would pay for those revenue losses by repealing or modifying a large number of business tax rules. It would scrap dozens of highly targeted, industry-specific credits, repeal a special deduction for domestic manufacturing, and eliminate generous accounting rules for inventories. But two changes bring in the most revenue: Eliminating accelerated depreciation ($270 billion). The proposal would repeal the current tax law’s favorable depreciation system (the Modified Accelerated Cost Recovery System, or MACRS) which generally allows firms to depreciate capital assets faster and over shorter time periods. Instead, most investment would be written-off more slowly, but indexed for inflation. Amortizing R&D and advertising expenses ($360 billion). Instead of expensing these costs in the year they are incurred, firms would have to capitalize them over several years. Research expenses would be deducted over five years. Firms could deduct half of their advertising expenses right away, and write-off the rest over 10 years. The other big revenue raiser comes from Camp’s restructuring of the taxation of U.S.-based multinationals. His move toward a “territorial” tax system (“participation exemption system with base erosion protections” for tax nerds) would be more than offset by a one-time tax on foreign earnings that are parked overseas, payable over 8 years. This transition tax would generate $170 billion within the ten-year budget window, but little revenue beyond 2024. Camp would make few big changes to the structure of “pass-through” businesses—those firms taxed on individual rather than corporate returns—even though he included many in one of his earlier discussion drafts. Owners of businesses organized as sole proprietorships, limited liability companies (LLCs) or other partnerships, and S Corporations would continue to pay individual income taxes at ordinary rates as high as 35 percent (including the 10 percent surtax). However, income attributable to domestic manufacturing would be exempt from the surtax. Add it all up and the Camp proposal would raise more revenue from businesses in the ten-year window than under current law. But does he really raise their tax burdens? Probably not. The largest revenue raisers in the budget window are provisions that affect the timing—rather than the level—of deductions, and the temporary transition tax on deferred foreign profits. The timing changes raise more revenue during the transition than in the long-run (when higher deductions from past investments partially offset lower deductions for current investments) and revenue from the transition tax will rapidly disappear beyond 2024. Combined with the phased-in corporate rate cut and other international tax changes, this suggests that, on balance, businesses will be winners from this proposal.