There’s a reason it has been 28 years since the last rewrite of the federal tax code.
Rep. Dave Camp charged into a political minefield last week as the Michigan Republican unveiled a 1,000-page tax bill that earned a lot of kudos but not a lot of co-sponsors.
Taking the sunny view was Georgia Republican U.S. Sen. Johnny Isakson, who serves on the tax-writing committee in the Senate.
“You also haven’t seen anybody run away from it, starting with the White House,” he said. “I haven’t seen a huge outcry against it. I’ve seen a lot of questions raised.”
For most Americans, the changes are simple and dramatic: Three tax brackets (10, 25 and 35 percent) instead of the current seven (topping out at 39.6 percent), and an increased standard exemption meaning an estimated 95 percent of filers will not itemize deductions anymore.
The bill also includes a sweeping overhaul of corporate taxes and deductions, stepping on the toes of various interest groups along the way.
The goal is to unleash economic growth, and the Joint Tax Committee estimates Camp's proposal will be a boon to the Gross Domestic Product at a time of disheartening growth projections.
After a meeting with Camp, Isakson was mostly supportive of the plan, even scaling back the home mortgage interest deduction. A longtime Realtor, Isakson pointed out that the deduction is grandfathered for existing home loans and reducing the cap on the mortgage size from $1 million to $500,000 won’t affect most homeowners.
Rep. John Lewis, an Atlanta Democrat who serves on Ways and Means, had kind words for Camp as well, though he does not like scrapping deductions for child care and preserving historic buildings.
“We’re still working through the bill but I appreciate it, and I have said it to (Camp) that I appreciate him bringing something forward,” Lewis said.
So it went from all types of lobby groups: Thanks for coming up with a proposal, but we disagree with this piece.
The Wall Street-backed Club For Growth does not like treating capital gains taxes as ordinary income – even with a 40 percent deduction. The Association of Fundraising Professionals does not like establishing a new minimum on charitable contributions in order to qualify for a deduction.
White House spokesman Josh Earnest, after offering some praise, said some of the new revenue should go toward reducing the deficit and the Earned Income Tax Credit for low-income Americans should be expanded.
The tax code touches just about every aspect of American life, leaving any rewrite vulnerable to being picked apart. Rep. Rob Woodall, a Lawrenceville Republican, wants to ditch the entire code in favor of a national sales tax. But he said Camp’s proposal is a positive step, if imperfect.
“If this was a partisan hatchet job, it gets rolled out in the middle of the night and jammed through the floor,” Woodall said. “If this is a serious effort to grow the American economy, it gets rolled out the way he’s rolling it out and it gives members on both sides of the aisle a chance to say: ‘This might not be exactly what I want, but it’s a step in the right direction.’ ”
Speaker John Boehner laughed at the idea of scheduling a vote for the proposal. Ahead of the midterm elections, the divided Congress appears ready to dig in and avoid tough legislating for the rest of the year in favor of pushing partisan measures.
But as the Camp proposal sinks in, it can provide a basis for a tax revolution. Isakson posited that everyone running for president in 2016 will need a detailed tax-reform plan, now that a credible one is sitting in Congress.
“That’s what’s going to determine the election in 2016 is who’s got the best jobs and economic growth proposal,” he said. “And the tax code is a key part of that.”
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