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House Ways and Means chairman Dave Camp, a moderate Republican from Michigan, has released a 979-page tax reform bill – and, in the journalistic parlance of the Times, it’s a “sweeping” one. The bill promises what Camp calls a “simpler, fairer tax code”, cuts middle class taxes, and eliminates some of the more common tax breaks. It also seems to have no realistic chance of passing. Senate majority leader Mitch McConnell — also a Republican — said, “I have no hope for that happening this year”.
However futile, Camp’s bill is notable in that it changes the economic conversation on tax reform. Reihan Salam is excited about the bill, even if it’s doomed. Jonathan Chait says the bill “may be the most impressive and ambitious domestic policy proposal crafted by a major Republican in a generation”. Instead of the standard Republican rhetoric on cutting taxes, Chait says, the Camp bill focuses on eliminating tax breaks.
MarketWatch has a list of some of the major tax breaks that would be affected: the mortgage interest deduction would be capped at $500,000, state and local income taxes wouldn’t be deductible, and the bill would end breaks for sports leagues (take note, Roger Goodell). The measure would also end tax breaks for many private equity partnerships (take note, Blackstone).
Felix writes that the bill resurrects the long-dead idea of a bank tax, which was an Obama priority in 2010. “It is Pigovian tax on something (too-big-to-fail financial institutions) we don’t want, and often Pigovian taxes are more effective than regulation when it comes to minimizing such things”. The Cato Institute’s Mark Calabria worries that the 0.035% tax on assets above $500 billion would “turning the banks into a revenue stream for the federal government” — a la Fannie and Freddie.
The Center on Budget and Policy Priorities writes that the plan relies on some budget gimmickry to be revenue neutral over the first 10 years. Perhaps more troublingly, the CBPP says that by cutting the Earned Income Tax Credit, the bill could leave a working mother with $2,000 less each year. For what it’s worth, studies have found the EITC is quite effective at alleviating poverty and promoting work.
James Pethokoukis says the bill marks the end of an era: “the Age of Tax Cuts is over. But the Age of Tax Reform has not yet arrived”. Stan Collender says the bill destroys any hope of getting tax reform done this year — the bReill raises taxes on key Republican constituencies, he says, and Camp is on his way out as chairman of the House Ways and Means Commission.
To Joshua Green, the most surprising thing about the bill is that it was put forth at all: both parties have mostly stopped making laws for the year and are preparing for the midterm elections. – Ryan McCarthy
On to today’s links:
Correction: This post has been updated to reflect the fact David Camp is in fact a representative from Michigan, not Texas.