The Issue: Tax reform legislation is Camp's sendoff

By NICOLE DEBEVEC, United Press International

Despite indications that his bill was DOA, House Ways and Means Committee Chairman Dave Camp introduced draft legislation that would reform the byzantine -- some say draconian -- U.S. tax code.

Deductions considered untouchable are touchable in the 1,000-page document the Michigan Republican introduced last week at a time when most congressional members want to fly under the midterm election radar.


"We have an obligation to debate the big issues of the day," Camp said. "I put out this detailed discussion draft so we can engage the American people in this."

Camp's plan targets two of the most popular deductions in the U.S. tax code: Deductions for mortgage interest and for state and local property taxes.

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The National Association of Realtors expressed disappointment over the proposed fate of the two popular deductions, which would "impact every single American, either directly or indirectly," the Hill reported.


With changes to tax breaks for mortgage interest, charitable contributions and state and local taxes, Camp said about 95 percent of households could use an expanded standard deduction and avoid itemizing, well above the estimated two-thirds of filers now using the standard deduction now.

Camp, barred by term limits to retain his chairman's gavel after this year, said his draft legislation would help fix the country's "broken" tax code by lowering rates, and making the code simpler and fairer for families and job-creators.

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The process was arduous and was spread over the three years Camp led the Ways and Means panel -- 30 hearings, 11 bipartisan tax reform working groups, three discussions drafts and more than 14,000 public comments.

"This legislation does not reflect ideas solely advanced by Democrats or ideas solely advanced by Republicans, nor is it limited to the halls of Congress," Camp said when unveiling it. "Instead, this is a comprehensive plan that reflects input and ideas championed by Congress, the administration and, most importantly, the American people."

"In other words, it recognizes that everyone is a part of this effort and can benefit when we have a code that is simpler and fairer," he said. "I am hopeful that lawmakers on both sides of the aisle -- and partners at both ends of Pennsylvania Avenue -- take a close look at this plan and share their thoughts and ideas, and those of their constituents. The bottom line: Just saying 'no' is not a solution."


"Washington must make real progress on the critical issues of the day, the most important of which is strengthening the economy," Camp said. "We can, and need, to work together to craft a plan that fixes our broken code and strengthens the economy so there are more jobs and bigger paychecks for hardworking taxpayers."

Among other things, Camp's plan would flatten the code by reducing rates to two brackets of 10 and 25 percent for nearly all taxable income, and would reduce the corporate tax rate to 25 percent.

It also would bump the standard deduction for individuals and married couples, and also increase the child tax credit.

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Camp said his plan also would tax long-term capital gains and dividends as ordinary income, but exempts 40 percent of such income from tax, resulting in a 3 percentage point decrease from the maximum rates individuals now pay.

Besides lowering tax rates for families and all job creators, Camp said his would repeal the Alternative Minimum Tax -- the bane of many a previous congressional session -- for individuals, pass-through businesses and corporations.

It also folds in accountability language for the IRS and would repeal more than 220 sections of the tax code, shrinking its size by 25 percent.


Camp said the Tax Reform Act of 2014 would, based on an analysis by the independent, non-partisan Joint Committee on Taxation, create as many as 1.8 million new private sector jobs, allow about 95 percent of tax filers to get the lowest possible tax rate by claiming the standard deduction, and strengthen the economy and increase gross domestic product by as much as $3.4 trillion -- without increasing the budget deficit.

Again, citing data provided by the Joint Committee on Taxation, Camp said the average middle-class family of four could see an extra $1,300 per year from the combination of lower tax rates in the plan and higher wages due to a stronger economy.

"It is no secret that Americans are struggling," Camp said. "We've already lost a decade, and before we lose a generation, Washington needs to wake up to this reality and start offering concrete solutions and debating real policies that strengthen the economy and help hardworking taxpayers. Tax reform is one way we can do that."

That's all well and good, but what does the House leadership have to say?

Before Camp released his not-so-secret document, House Speaker John Boehner dashed suggestions that a sweeping tax reform bill designed by Camp would come up for a vote in 2014.


The Ohio Republican called the document "a discussion draft" and sought to lower expectations for fast action on the plan during a media availability last week.

Asked whether Camp's proposal could become the GOP's official tax reform plan, Boehner said, "You're getting a little ahead of yourself."

Senate Minority Leader Mitch McConnell of Kentucky also suggested it'd be better to tackle tax reform at a later date while pitching the prospect of tax reform under a Republican-led Senate.

McConnell told reporters on Capitol Hill last week differences between Democrats and Republicans can't be resolved this year, suggesting the issue would best be left alone until after the 2014 midterm elections.

"I think we will not be able to finish the job, regretfully, in 2014," he said.

"Now, if we had a new Republican Senate next year, coupled with a Republican House, I think we could have at least a congressional agreement that this is about getting rates down and making America more competitive, not about giving the government even more revenue," McConnell said.

Senate Majority Leader Harry Reid, D-Nev., also said he doubted tax reform would be taken up this year, but for a different reason than cited by McConnell.


"I think we should have tackled tax reform years ago, but it will be extremely difficult with the obstruction we get here from Republicans on virtually everything," Reid said.

Rep. Paul Ryan, R-Wis., current Budget Committee chairman and heir apparent to the Ways and Means chairmanship next year, said Camp's plan is a good foundation -- and the Senate's top two tax writers, Sens. Ron Wyden, D-Ore., and Orrin Hatch, R-Utah, also praised it, the Hill said.

"No plan is perfect, but the critics must offer an alternative or tell Americans why they continue to defend a nightmarish tax code that works only for the well-connected," Ryan said in a statement. "Chairman Camp's plan is a terrific first step toward a much-needed debate over how to best reform the tax code."

House Democratic Leader Nancy Pelosi of California said the proposal must be judged by "its impact on the middle class, its consequences for working families and its effect on our nation's deficit."

"This Republican measure must be reviewed as part of a broader discussion on action to build an economy that works for everyone," she said.


White House spokesman Josh Earnest said pieces of Camp's proposal were "encouraging" and the Obama administration would "certainly take part" in discussions with members of either party.

Earnest said the White House was pleased to see Camp's proposal close some of loopholes "that the president has long advocated closing," including loopholes for the corporate jet tax and the carried-interest tax, along with "a series of other unfair tax loopholes that don't contribute to long-term economic growth."

However, Earnest said the White House was concerned there "doesn't appear to be any revenue raised from the proposal that goes to reducing the deficit," among other things.

The administration, Earnest said, was well aware that prospects were dim for passage of such a complicated piece of legislation.

"There's not a great deal of optimism on Capitol Hill for any kind of legislative proposal that seems complicated," he said. "There is no doubt that, by any definition, reforming a tax code, particularly the business tax code, is complicated."

The Campaign to Fix the Debt commended Camp for putting forward a "comprehensive tax reform plan that actually confronts the tough choices and trade-offs required to fix our broken tax code," and urged policymakers to use the draft as a starting point.


The organization, as had the White House, expressed concern about the draft's impact on the federal debt.

"While we are encouraged that Chairman Camp's draft would not add to the deficit over 10 years under conventional scoring without rosy assumptions, we are concerned that the draft would increase long-term deficits," the organization said. "Instead, tax reform should be designed to increase revenues and reduce deficits not only in this decade but over the long term as well."

The Committee for a Responsible Federal Budget also said Camp's bill, "by no means perfect," takes important steps toward achieving tax reform.

"Despite any shortcomings, the draft represents a productive and important step forward," the bipartisan, non-profit organization said. "We encourage policymakers to view it as a starting point, and we call on them to build upon these thoughtful reforms to construct a bipartisan tax bill that promotes growth and reduces deficits this decade and over the long term."

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