Camp’s plan would restore three tax rates (15 percent, 25 percent and 35 percent), reduce corporate taxes, place an excise tax on banks, repeal state and local tax deductions, and place an income ceiling on mortgage interest and charitable contribution deductions.
The response wasn’t surprising: Bankers naturally opposed a tax on themselves. Realtors opposed capping the mortgage interest deduction at $500,000. Democrats complained about eliminating the deduction for state and local taxes, which have the most impact in predominantly Democratic northern states where those rates are high. Republicans backed away, fearful that talk of eliminating popular deductions would give Democrats a potent weapon in this year’s congressional elections.
The reality is that it’s impossible to lower everyone’s rates and retain popular deductions without losing revenue.
Though most Republicans and some Democrats favor a bill that neither gains nor loses revenue, that may not be the best answer. Given long-term deficit projections, any major overhaul ought to produce additional revenue, primarily from the wealthiest taxpayers. Along with modest curbs on future Social Security and Medicare benefits, the revenue hike would narrow long-term deficits beyond what an improving economy could achieve.
Compromise is a dirty word in Washington. Indeed, the only bipartisanship that Camp’s plan produced was both parties’ criticism, though White House spokesman Josh Earnest called the proposal “a positive development.”
Meanwhile, Camp is retiring from Congress, and his probable successor as Ways and Means chairman, Congressman Paul Ryan of Wisconsin, drafted the budget that de-emphasized tax reform.
Realistically, the subject seems off the table until after the next presidential election. And the chances of doing something then might depend on whether the next president makes tax reform a campaign issue, as Reagan did back in 1984.
Carl P. Leubsdorf is the former Washington bureau chief of the Dallas Morning News. Readers may write to him via email at: email@example.com.
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