February 26, 2014, 02:37 pm
GOP Ways and Means chairman unveils mammoth tax reform bill
By Bernie Becker
The House’s top tax writer rolled out a broad tax reform plan on Wednesday that would pare back tax breaks once thought untouchable and affect practically every part of American life.
The nearly 1,000-page plan unveiled by Ways and Means Chairman Dave Camp (R-Mich.) would pull back on the deduction for home mortgage interest used by tens of millions of home owners, and embraces some ideas touted by Democrats, like scrapping the “carried interest” tax break used by hedge fund managers.
Camp said a discussion on making the tax code fairer and a more positive force for the economy was long overdue in Washington, but the discussion draft, which included a summary that along ran almost 200 pages, quickly found detractors both on and off Capitol Hill, as trade groups and lobbyists found out who were the losers in the chairman’s outline.
Even before it was released, the top Republicans in both chambers had distanced themselves from the effort, with Speaker John Boehner (R-Ohio) scoffing at the possibility of a vote this year and Senate GOP Leader Mitch McConnell (Ky.) saying it would be better to do tax reform next year.
But Camp was defiant, arguing Wednesday that the average person was ready for a tax code no longer littered with “special interest handouts.”
“You’re going to hear a lot about one provision or another,” Camp told reporters at a news conference introducing his long-awaited draft. “The truth is people want a simpler, fairer and flatter tax code.”
The Michigan Republican said he meets that goal by getting rid of 227 sections of the tax code, or roughly a quarter of its current 70,000 pages.
With changes to tax breaks for mortgage interest, charitable contributions, and state and local taxes, Camp also says that around 95 percent of households would be able to use the standard deduction and avoid itemizing – down from around seven in 10 right now. The deduction for state and local taxes – which Camp outright eliminates – is especially prized in Democratic states like New York and California.
But the release from Camp also acknowledges that he fell short on the House GOP goal of reducing the top individual rate to 25 percent. Roughly 99 percent of taxpayers, Camp says, will pay 25 percent or less, while the rest will face a top bracket of 35 percent.
Camp did succeed in lowering the corporate rate to 25 percent, by chopping off 2 percent a year over five years. In the process, Camp makes the prized credit for research and development permanent, while also stretching out depreciation schedules and getting rid of an accelerated cost recovery system.
Still, Camp also acknowledged that he was at times hamstrung by the fiscal cliff deal hashed at the end of the last Congress, which raised the top individual tax rate to close to 40 percent.
He also noted that his vow to not shift any of the tax burden away from the rich – which he made with his longtime partner, former Senate Finance Chairman Max Baucus (D-Mont.) – also meant that some tax provisions that have entrenched constituencies and are popular among Republicans had to be changed.
Some Democrats, like Rep. Sandy Levin (Mich.), the ranking member at Ways and Means, said they would keep an open mind about the draft, with an eye toward how Camp’s plan tries to battle issues like income inequality.
But others, like Chuck Schumer (N.Y.), the No. 3 Democrat in the Senate, underscored the challenge in making progress on tax reform this year.
“Any proposal that eliminates the deduction for state and local taxes, as the Republican plan would do, is dead on arrival,” Schumer said in a statement.