Republican Rep. Dave Camp has heard the death rattle from his own party trying to kill three years of work he did to overhaul the nation's tax code. But Camp, who chairs the House Ways and Means Committee, isn't giving up on what would be the first comprehensive tax reform plan in almost 30 years. He said Wednesday that he expects public hearings on his tax plan to draw attention to what he says is a commonsense way to grow the economy—even though GOP leaders want nothing to do with tax reform during a midterm election year.
“I think nine months is a long time to coast,” Camp told reporters at a Christian Science Monitor breakfast. “I don’t think people really sent their representatives to Washington to warm a chair for the bulk of the year, particularly when it is a two-year term.”
Camp released his reform proposal last week to mixed reviews. Figures in the banking and finance community, including JPMorgan chief Jamie Dimon, have blasted the levy it would impose on big banks. The plan would raise $85 billion over the next decade from about 10 banks with assets exceeding $500 billion, according to Bloomberg.
Camp said Wednesday that “most financial institutions will actually see a rate reduction,” and that the banking sector would benefit from a stronger economy, even though the draft plan echoes President Barack Obama’s vision in taxing private equity profits, known as carried interest, at a higher rate like regular income. Pushing back against the financial community’s criticism, Camp cited a Wall Street Journal article about Leon Black, a private equity firm executive who received over $546 million in dividends and compensation for 2013 on a salary of $100,000.
“Clearly more of that income was salary than that small percentage,” Camp said. “The way carried interest is treated now is not an accurate reflection of reality.”
Camp’s plan would lower the federal corporate tax rate from 35 percent to 25 percent, and would compress the seven individual income tax rates, ranging from 10 percent to 39.6 percent, to just three: 10 percent, 25 percent and 35 percent, with the latter hitting the one percent of individuals earning $400,000 and married couples earning at least $450,000. Citing the nonpartisan Joint Committee on Taxation, Camp said his plan is revenue neutral, meaning it wouldn't raise more money than it gives up (though some call that inaccurate after the 10-year window expires). He also claims it would generate up to $700 billion in tax revenue and create up to 1.8 million new private-sector jobs.
On Wednesday, Camp added that the plan is “distributionally neutral,” with low-income people paying the same effective rate they do now, although the left-leaning Center on Budget and Policy Priorities has hit the proposal for reducing the Earned Income Tax Credit for some poor families. Camp counters that there is massive fraud in the system that gives out the tax credits.
While Camp's proposal is now a Republican benchmark for tax reform, party leaders have put the lid on it for the rest of the year. House Speaker John Boehner, pressed last week about the likelihood of a vote, could only murmur an “ah Jesus.” Senate Minority Leader Mitch McConnell said Republicans would have to win back the Senate, which would only come after Camp relinquishes his committee gavel due to term limits. When asked if the committee term-limits rule—set after the 1994 “Contract with America” vaulted Republicans to a House majority—was a mistake, Camp laughed: “Yeah, I think so."