The courage to tackle tough problems may be a rare commodity in Washington these days, but there are still a few members of Congress willing to advance fundamental change to overcome the country’s largest challenges. House Ways and Means Chairman Dave Camp, R-Mich., is one of those lawmakers. He recently released a comprehensive, detailed tax reform plan aimed at initiating substantive discussions focused on overhauling America’s broken tax code. The release of this draft represents a critical step forward in the process of comprehensive tax reform, a process that will benefit all Americans.
Many members talk about tax reform that broadens the base and reduces rates in the abstract, but far too many shy away when it comes to making the tough choices to eliminate or scale back specific tax breaks to make the math work. As a former tax commissioner and someone who served on the Senate Finance Committee, I can tell you that every tax break has a constituency that aggressively defends it. And while many have worthwhile goals, the cumulative effect is a tax code that is complex, inefficient and wasteful. The code is riddled with trillions of dollars in economy-distorting loopholes that cater to special interests and leave hundreds of billions of dollars on the table. If lawmakers are willing to take on special interests and reduce these tax expenditures, they can produce a tax code that is simpler and fairer, promotes economic growth and competitiveness, and reduces the deficit. Camp’s proposal is a valuable step toward this goal.
To be sure, the plan unveiled by Camp is not a plan I would write, and changes will be necessary to get bipartisan support. While I commend Camp for making tough choices necessary to achieve savings from tax expenditures to pay for lower rates and permanently address tax extenders, the draft fails to use any of those savings to reduce the deficit. With the burden that an aging society will place on the budget, we need tax reform to generate more revenues than the current tax code even with equally necessary reforms to control the cost of entitlement programs.
Likewise, while the plan is roughly distributionally neutral, some low- and moderate-income working families will pay more than they do today, and given the tremendous inequality in our nation, the plan should ask more from the wealthiest who have bounced back from the Great Recession faster than the rest of society. And while the draft takes on many tax expenditures, it could go further in limiting some tax expenditures, such as the health exclusion and various preferences for capital gains.
But these are all issues that can and should be addressed in a legislative process now that we have a starting point. Many of the specific provisions in Camp’s proposal have already come under intense attack from affected interests, and there has been talk about putting tax reform on the back burner because of the tough choices involved. But the reason tax reform wasn’t done long ago is because there will always be opposition because someone somewhere is benefiting from the status quo. We cannot simply scrap the idea of tax reform because a small group stands to benefit from a coveted expenditure or loophole and voices their opposition to a proposed change.