Camp Unveils Tax-Reform Plan Amid Dim Prospects

WASHINGTON, DC - JANUARY 08: House Ways and Means Committee Chairman Dave Camp (R-MI) participates in a news conference on the 50th anniversary of the start of the War on Poverty at the U.S. Capitol Visitors Center January 8, 2014 in Washington, DC. The War on Poverty is the unofficial name for legislation first introduced by President Johnson during his State of the Union address on January 8, 1964, which led the United States Congress to pass the Economic Opportunity Act, which established the Office of Economic Opportunity (OEO) to administer the local application of federal funds targeted against poverty. 
National Journal
Billy House
See more stories about...
Billy House
Feb. 25, 2014, 4:30 p.m.

There is no chance of it be­ing ac­ted on this Con­gress, but House Ways and Means Chair­man Dave Camp on Wed­nes­day will un­veil “draft le­gis­la­tion” to over­haul the na­tion’s tax code, pro­pos­ing ma­jor changes for both in­di­vidu­als and busi­nesses.

Camp’s pro­pos­als would lower the cor­por­ate tax rate from 35 per­cent to 25 per­cent, and for top in­di­vidu­al earners from 39.6 per­cent to 25 per­cent. But his plan goes much wider.

It in­cludes a cap on new home mort­gage in­terest de­duc­tions at $500,000, re­peal of the state and loc­al tax de­duc­tion, re­duc­tions in the earned in­come tax cred­it for low-wage earners, and con­ver­sion of cer­tain 401(k) ac­counts to Roth IRA-like ac­counts.

Ac­cord­ing to those with know­ledge of the plan, there would be ba­sic­ally two rates on in­di­vidu­als — down from the cur­rent sev­en brack­ets: 10 per­cent for those be­low roughly $75,000 and 25 per­cent for those above that level of an­nu­al in­come.

A 10 per­cent “sur­tax” would ap­ply to earn­ings above $450,000 for joint filers. And for this pur­pose, the sur­tax would not ap­ply to cer­tain do­mest­ic man­u­fac­tur­ing in­come, but the base would in­clude mu­ni­cip­al bond in­terest and em­ploy­er-provided health in­sur­ance premi­ums.

Also, the stand­ard de­duc­tion and the child tax cred­it would phase out on in­comes above $300,000 on joint re­turns.

There also would be a 40 per­cent ex­clu­sion for cap­it­al gains and di­vidend in­come — mean­ing a max­im­um rate on those cat­egor­ies of 15 per­cent.

Camp’s plan calls for re­peal of the in­di­vidu­al al­tern­at­ive min­im­um tax as well.

On the cor­por­ate side, the re­duc­tion from 35 per­cent to 25 per­cent would be phased in over five years by 2 per­cent a year.

The draft bill would also elim­in­ate the Mod­i­fied Ac­cel­er­ated Cost Re­cov­ery Sys­tem (MACRS is the cur­rent tax de­pre­ci­ation sys­tem in the United States) and lengthen cer­tain lives for new as­sets.

The bill would re­quire amort­iz­a­tion rather than ex­pens­ing of cer­tain re­search and ex­per­i­ment­a­tion ex­penses, and ad­vert­ising ex­penses. For in­stance, ad­vert­ising is now treated as an or­din­ary, fully de­duct­ible busi­ness ex­pense in the year it is in­curred. Camp’s plan calls for al­low­ing busi­nesses to de­duct only 50 per­cent, and re­quires that the bal­ance be amort­ized over some num­ber of years.

Demo­crats on Tues­day had not seen the full plan, but have already been ques­tion­ing how Camp would pay for all of the changes. Some rev­en­ue-raisers are in­cluded. It would re­quire big U.S. banks and in­sur­ance com­pan­ies to pay a quarterly 3.5 basis-point tax on as­sets over $500 bil­lion — rais­ing $86.4 bil­lion over the next dec­ade.

But Demo­crats have char­ac­ter­ized an­oth­er move — the ex­pan­sion of the Roth IRA — as a “gim­mick” that they say could raise a lot of money now but cost a lot of money in the fu­ture.

“We’re go­ing to be re­quest­ing a 20- to 30-year Con­gres­sion­al Budget Of­fice score,” one seni­or Demo­crat­ic aide said late last week.

And even be­fore Camp has un­veiled his tax pack­age — sched­uled to oc­cur at a Cap­it­ol news con­fer­ence at 1:30 p.m. Wed­nes­day — Re­pub­lic­an and Demo­crat­ic lead­ers in the Sen­ate are shoot­ing down the pos­sib­il­ity of get­ting sig­ni­fic­ant le­gis­la­tion through this year.

Both Ma­jor­ity Lead­er Harry Re­id and Minor­ity Lead­er Mitch Mc­Con­nell blamed one an­oth­er Tues­day for hold­ing the le­gis­la­tion up. “The truth is we should have tackled tax re­form years ago,” Re­id said. “It would be ex­tremely dif­fi­cult with the ob­struc­tion we get here from the Re­pub­lic­ans on vir­tu­ally everything.”

What We're Following See More »
STAFF PICKS
These (Supposed) Iowa and NH Escorts Tell All
10 hours ago
NATIONAL JOURNAL AFTER DARK

Before we get to the specifics of this exposé about escorts working the Iowa and New Hampshire primary crowds, let’s get three things out of the way: 1.) It’s from Cosmopolitan; 2.) most of the women quoted use fake (if colorful) names; and 3.) again, it’s from Cosmopolitan. That said, here’s what we learned:

  • Business was booming: one escort who says she typically gets two inquiries a weekend got 15 requests in the pre-primary weekend.
  • Their primary season clientele is a bit older than normal—”40s through mid-60s, compared with mostly twentysomething regulars” and “they’ve clearly done this before.”
  • They seemed more nervous than other clients, because “the stakes are higher when you’re working for a possible future president” but “all practiced impeccable manners.”
  • One escort “typically enjoy[s] the company of Democrats more, just because I feel like our views line up a lot more.”
Source:
STATE VS. FEDERAL
Restoring Some Sanity to Encryption
10 hours ago
WHY WE CARE

No matter where you stand on mandating companies to include a backdoor in encryption technologies, it doesn’t make sense to allow that decision to be made on a state level. “The problem with state-level legislation of this nature is that it manages to be both wildly impractical and entirely unenforceable,” writes Brian Barrett at Wired. There is a solution to this problem. “California Congressman Ted Lieu has introduced the ‘Ensuring National Constitutional Rights for Your Private Telecommunications Act of 2016,’ which we’ll call ENCRYPT. It’s a short, straightforward bill with a simple aim: to preempt states from attempting to implement their own anti-encryption policies at a state level.”

Source:
STAFF PICKS
What the Current Crop of Candidates Could Learn from JFK
10 hours ago
WHY WE CARE

Much has been made of David Brooks’s recent New York Times column, in which confesses to missing already the civility and humanity of Barack Obama, compared to who might take his place. In NewYorker.com, Jeffrey Frank reminds us how critical such attributes are to foreign policy. “It’s hard to imagine Kennedy so casually referring to the leader of Russia as a gangster or a thug. For that matter, it’s hard to imagine any president comparing the Russian leader to Hitler [as] Hillary Clinton did at a private fund-raiser. … Kennedy, who always worried that miscalculation could lead to war, paid close attention to the language of diplomacy.”

Source:
STAFF PICKS
Hillary Is Running Against the Bill of 1992
10 hours ago
WHY WE CARE

The New Covenant. The Third Way. The Democratic Leadership Council style. Call it what you will, but whatever centrist triangulation Bill Clinton embraced in 1992, Hillary Clinton wants no part of it in 2016. Writing for Bloomberg, Sasha Issenberg and Margaret Talev explore how Hillary’s campaign has “diverged pointedly” from what made Bill so successful: “For Hillary to survive, Clintonism had to die.” Bill’s positions in 1992—from capital punishment to free trade—“represented a carefully calibrated diversion from the liberal orthodoxy of the previous decade.” But in New Hampshire, Hillary “worked to juggle nostalgia for past Clinton primary campaigns in the state with the fact that the Bill of 1992 or the Hillary of 2008 would likely be a marginal figure within today’s Democratic politics.”

Source:
STAFF PICKS
Trevor Noah Needs to Find His Voice. And Fast.
11 hours ago
WHY WE CARE

At first, “it was pleasant” to see Trevor Noah “smiling away and deeply dimpling in the Stewart seat, the seat that had lately grown gray hairs,” writes The Atlantic‘s James Parker in assessing the new host of the once-indispensable Daily Show. But where Jon Stewart was a heavyweight, Noah is “a very able lightweight, [who] needs time too. But he won’t get any. As a culture, we’re not about to nurture this talent, to give it room to grow. Our patience was exhausted long ago, by some other guy. We’re going to pass judgment and move on. There’s a reason Simon Cowell is so rich. Impress us today or get thee hence. So it comes to this: It’s now or never, Trevor.”

Source:
×