Let's give props to Michigan GOP Rep. Dave Camp, who as chair of the House Ways and Means Committee, actually took a serious stab at coming up with a tax reform proposal. It's still got smoke and mirrors, of course (after all, these are Republicans), but it's at least an attempt at something approaching serious policy making -- and it doesn't involve abortion or repealing the Affordable Care Act. Jared Bernstein explains:
The bill has some worthy aspirations, and he bravely throws some treasured loopholes, like “carried interest,” by the wayside. The plan significantly lowers the cap on the amount of mortgage interest that homeowners can deduct (a tax break that skews heavily toward the wealthy). It includes an excise tax on large banks to offset the implicit subsidy these institutions enjoy by dint of being too big to fail. It pegs tax brackets to a price index that grows more slowly, meaning more income will pass into higher brackets than is now the case. Though the politics of tax reform is extremely cramped — even some of Mr. Camp’s fellow Republicans are saying his proposal isn’t going anywhere — it may prove to be a useful starting point for negotiations down the road.
But in its current incarnation, the plan is fundamentally flawed. First, it claims to be revenue neutral, but achieves that goal only with timing gimmicks that ensure that its revenue neutrality will not last. Second, revenue neutrality is itself a recipe for an unsustainable budget path. Our demographics alone, not to mention growing challenges like climate change, imply future demands on government programs that clearly show neutrality to be a misguided guidepost for tax reform.
Mr. Camp’s plan seeks simplicity, a venerable goal, by reducing the current set of seven income-tax brackets (ranging from 10 percent to 39.6 percent) down to two (10 percent and 25 percent), although he includes a 10 percent surcharge on certain income sources for the top 1 percent of earners — again, not something you’d expect from his side of the aisle these days.
Bernstein goes on to say that Camp's proposal for a territorial taxing system for multinational corporations is "an incentive for more offshoring of production and jobs and is thus a significantly worse option than the administration’s idea for a minimum tax on foreign earnings."
And of course Camp wants to undermine the earned-income tax credit, which is about what you'd expect from these extremist Republicans.
The plan also has problems with revenue "gimmicks" that increase it in the first 10 years, but then expire, "leading to all kinds of headaches for both deficits and growth." In fact, Bernstein says, the lack of sustained revenue makes it unworkable in the long term.
Still: Keeping in mind that in the valley of the blind, the one-eyed man is king, this is at least a more serious effort than we've come to expect from the Republicans. Which means, as Bernstein reminds us, that it won't go anywhere.
