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The Washington Post: Tax-code reform dead on arrival

The Washington Post

The Washington Post

First Published Feb 28 2014 01:01 am • Last Updated Feb 28 2014 01:01 am

In a properly functioning Washington, the tax reform plan unveiled Wednesday by House Ways and Means Committee Chairman Dave Camp, R-Mich. would kick off a major debate over how to fix the federal government’s inefficient system of revenue collection.

Mr. Camp proposes to overhaul both the corporate and individual tax codes, based on the principle that lower rates should be applied to a broader base of income — that is, one that is purged of many loopholes and deductions that litter current law. The Camp plan would reduce the corporate rate to 25 percent from a maximum of 35 percent and replace the seven marginal rates for individuals with three: 10 percent, 25 percent and 35 percent.

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The congressional Joint Committee on Taxation scores the plan as essentially revenue-neutral; that is, it neither increases nor decreases the federal government’s total tax take. Its most innovative feature is an expansion of the standard deduction, which would take away any incentive to claim tax breaks from all but the wealthiest 5 percent of filers. For these people, Mr. Camp would trim both the mortgage-interest and charitable deductions.

Mr. Camp is admirably specific about other special-interest goodies he would do away with to pay for his lower rates: The notorious special treatment of "carried interest" for hedge fund managers would go, as would the break for corporate jets.

In the actual Washington, alas, Mr. Camp’s proposal has basically no chance of passage, or even of being acted upon this year. Much of the blame for that belongs with the leaders of his party, who smell victory in the November elections and don’t want to do anything controversial — that might put that prospect at risk.

Not everything in Mr. Camp’s fine print strikes us as sensible. He would leave the favorable treatment of investment income for top earners, a major source of the growing rich-poor gap, basically intact. His plan takes gratuitous aim at Obamacare, sacrificing $29.5 billion in needed revenue (over 10 years) by eliminating an excise tax on medical devices. Its revenue estimates depend too heavily on improved efficiency in the earned-income tax credit, a program that is admittedly plagued by overpayments but is also a vital, effective support for low-income workers. Still, Mr. Camp’s proposal is a serious approach to a serious problem. It sets a standard of specificity. It acknowledges that, for rates to come down, some popular loopholes will have to be constricted. It leans in favor of GOP priorities, to be sure, but incorporates some Democratic ones. And for all those reasons, no one on Capitol Hill seems interested.




Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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