In a bold legislative move, Rep. Dave Camp (R-MI), chairman of the House Committee on Ways and Means, introduced legislation on Wednesday that would significantly reform the federal tax code in the United States.
“I’m not satisfied with waiting,” Camp told reporters on Wednesday. “I’m not going to settle for two percent growth and median incomes declining and more kids living with their parents. I want to see growth, I want to see jobs, I want to see higher incomes — tax reform can raise that.”
The bill includes measures that are popular among Republicans, like lowering the top corporate and individual tax rates. The bill would also simplify the tax code by collapsing seven separate tax brackets into three.
But instead of throwing their support behind one of their most important committee chairs, GOP leaders are running from the plan — and throwing Camp under the bus.
“It’s one chairman’s bill,” Rep. Greg Walden (R-OR) said dismissively.
House Speaker John Boehner (R-OH) isn’t prepared to back the bill, either. Rather, he says it should be seen as a jumping off point for a larger conversation. “You’re getting a little bit ahead of yourself,” Boehner said when asked if Camp’s plan is the Republican Party’s plan. “We’ve talked about this and Chairman Camp’s worked on this for years. It’s time to have a public conversation about the issue of tax reform. And so I welcome the conversation.”
Why does the GOP have cold feet?
For starters, the bill includes divisive provisions that the GOP leadership is not prepared to introduce in an election year. While Republicans would love to tout a lower corporate tax rate to its base, explaining a new surtax on the wealthy may be more difficult. According to the Associated Press, the plan would include a 10 percent surtax on earned income above $450,000.
That isn’t the only provision that makes Republican lawmakers leery of the bill.
It also includes a stipulation that would end deductions for state and local taxes. As of now, taxpayers can itemize deductions from state and local taxes from their taxable federal income. Camp’s proposed bill would end this tax break for individuals.
The provision that ends state and local deductions has sparked heated debate between influential Democratic lawmakers and their Republican counterparts.
As Talking Points Memo’s Sahil Kapur points out, the states that benefit most from the state and local deductions are Democratic strongholds like California and New York. Senator Chuck Schumer (D-NY) had this to say about a bill that would end the deductions: “Any proposal that eliminates the deduction for state and local taxes, as the Republican plan would do, is dead on arrival.”
Even though eliminating deductions for state and local taxes does have some support within the GOP, it may not be the debate Republicans want to have in an election year.
Democrats seem eager to play offense against the bill. “Frankly, I don’t understand the politics of it,” Rep. Jim McDermott (D-WA) told Politico. “He knows it’s not going anywhere, but it will be used” against his colleagues. “The question will be: Do you support Dave Camp’s bill?”
Rep. Bill Pascrell (D-NJ) piled on: “It doesn’t make sense. You don’t send up trial balloons on such significant issues — particularly in an off-year election.”
Some Democrats also argue the bill will further disadvantage working families and the working poor. As the Center on Budget and Policy Priorities points out, Camp’s proposal includes changes to the Earned Income Tax Credit (ETIC) and the Child Tax Credit (CTC), which will push poor families further into poverty.
The Center on Budget and Policy Priorities explains: “A mother with two children who works full-time year-round at the minimum wage (earning $14,500 by working 2,000 hours at the $7.25 minimum wage) would lose about $2,000 in 2018 (when the plan’s changes in these credits would take full effect) compared to current policy — that is, compared to the CTC and EITC policies on the books today.”
Photo: Casey Konstantín via Flickr