The tax reform proposal issued this week by House Ways and Means Committee chairman Dave Camp, R-Mich., is continuing to generate plenty of discussion.
Camp’s proposal would, among other things, compress the corporate and individual tax rates into two brackets of 10 and 25 percent (see House Ways and Means Chairman Camp Releases Tax Reform Proposal and Tax Reform Proposal: Why It Matters).
James P. Pinkerton, a former White House domestic policy adviser to Presidents Ronald Reagan and George H.W. Bush who is now one of the co-chairs of the RATE Coalition, a group lobbying to lower the corporate tax rate, said he was very pleased with the proposal. “We think he made a great contribution to the ongoing debate,” he said in an interview Wednesday. “Obviously we’re very happy to see him zero in on the 25 percent corporate tax rate. We think on the whole, the proposal is getting a lot of respectful attention and interest, and is going to further the long process of reforming our Tax Code for the first time in 30 years.”
From his experience in the Reagan administration during the build-up to the Tax Reform Act of 1986, Pinkerton acknowledged that the process can be slow. “Having been through this before, I know back in ’86, tax reform lived and died two or three times before it was enacted,” he said. He admitted that it’s difficult to know exactly what’s going to happen, but said he is optimistic.
“There are lots of features in here where Chairman Camp says we’re going to reduce the size of the Tax Code and eliminate provisions, and make tax filing simpler for 95 percent of Americans if they want it,” said Pinkerton. “Those are attractive options overall, but this is just one proposal. The Democrats, with former Senator [Max] Baucus, had a proposal last year with good ideas, so we’re optimistic that the process continues.”
The prospects of getting a tax reform bill passed before the midterm elections seem unlikely, but there may be some movement forward with the proposal.
“We’ve always said this is a long process,” said Pinkerton. “We’ve always understood that this problem was three decades in the making and will be a long time solving. Obviously we hope to get it done sooner rather than later. We’re pretty confident. The President has endorsed lowering the corporate rate in four consecutive State of the Union addresses. We think that the stars are aligning for some kind of progress soon.”
Tiffany Young, a policy analyst with Bloomberg Government, believes Camp’s proposal is setting the stage for tax reform but doubts it will happen until 2015. “Rep. Dave Camp had his tax plan in the works for several years,” she said in an interview Thursday. “Initially he had talked about finally releasing it in 2013. However, different priorities in Congress took hold and Camp ended up delaying the actual release of his tax plan. Once we hit 2014, most in Washington thought that tax reform was off the table, especially with midterm elections coming up in November. Most of us here in Washington were surprised when Camp actually went ahead and released his plan.”
However, she believes the current plan has a low chance of actually becoming law, especially with the Obama administration set to unveil its own budget plan for the next fiscal year. “We have Obama’s budget coming up next Tuesday, and that along with midterms and other priorities in Congress will take precedence,” said Young. “With that said, Camp’s proposal was very long awaited, and even though it won’t become law this year, it really is setting the stage for the conversation to be continued and for something to happen next year.”
Young noted that Camp’s plan is comprehensive, and includes many aspects of individual and business tax reform, including changes to corporate taxes. “It’s really a platform for everybody in Washington to consider,” she said. “Looking at it from a tax policy perspective, the plan in general lowers both the individual and corporate tax rates. On that, most businesses agree. The plan is in general revenue neutral, but what they end up disagreeing on is how we end up paying for these rate reductions. There are changes in the credits and deductions. For example, the mortgage interest deduction is curved, which affects individuals and businesses in the housing industry. There are some benefits in the oil industry, specific to the oil credits that are also being repealed that the industry isn’t happy with. It’s going to be a conversation. Yes, we all agree on lowering these rates, but what are we taking away in order to finance these rate reductions?”