April 12 (Bloomberg) -- Republican Representative Dave Camp, chairman of what’s usually called the “powerful” House Ways and Means Committee, has a quiet voice. He’s tall and thin and leans in a bit when he speaks, as if to make sure you hear him when he says, “We are going to do a bill this year.”
He means legislation to rewrite the country’s byzantine tax laws, something that’s eluded Congress since 1986 and that has become Camp’s singular focus, Bloomberg Businessweek reports in its April 15 issue.
Elected to his first term in the same year as House Speaker John Boehner, Camp has represented central Michigan in the House for 22 years. As head of the Ways and Means panel, with authority over tax laws, he holds one of the most coveted positions in the Capitol -- though you can be excused for never having heard of him.
Camp spends weekends in his home state, not on the Sunday talk shows. He doesn’t offer up provocative sound bites for cable news. Instead, he has been meeting one-on-one with colleagues -- including every freshman Republican in the House - - trying to convince them there’s a way for Washington to break out of the cycle of standoffs over taxes and spending. He thinks they can come up with a deal that’s short of a grand bargain and still ambitious.
What politicians call tax reform sounds like a good idea -- until they start looking at the details and trade-offs. The George W. Bush administration considered a rewrite of the U.S. tax code in 2001, and opted to lower rates instead. Bush commissioned a bipartisan panel in 2005 and then ignored its report.
Camp, 59, wants to try again, aiming to cut the corporate and individual tax rates to 25 percent. In his budget plan released April 10, President Barack Obama called for a corporate rewrite that’s similar to Camp’s approach. They part ways when it comes to individuals, dividing over whether a tax overhaul should lower rates or increase revenue. It’s a major obstacle that Camp hasn’t explained how he’ll overcome.
To cut rates as much as Republicans would like, they’d need to find $5.7 trillion in offsetting tax increases over the next decade. That means Camp would have to consider curtailing or eliminating middle-class breaks for mortgage interest and charitable contributions. To simplify the system, he’d have to take on industries by doing away with their coveted breaks.
“The question is, do we get the kind of alignment of interests that are enough to overcome the centrifugal forces of the special interests that pull apart tax reform,” said Elaine Kamarck, a former aide to Al Gore who is now helping run a coalition of companies focused on reducing the corporate rate, including Nike Inc. and Macy’s Inc.
The process will be tedious, which is why it’s well-suited to a low-profile journeyman like Camp. He’s fond of saying the U.S. tax code is as long as the Bible with none of the good news. After taking over Ways and Means in 2011, Camp resisted pressure within his party to do a small deal that would have helped companies bring overseas profits home. He didn’t want to give away leverage he’d need for a more ambitious rewrite with the lower rates.
“His approach initially was to set a goal without any indication of how to get there,” says Michigan Representative Sander Levin, Camp’s Democratic counterpart on Ways and Means, who’s skeptical that Camp can meet his revenue and rate targets in a way that doesn’t make the tax code worse for most households.
To get a bill passed, leaders can craft it from the top down -- over sandwiches with the president or through a “blue-ribbon” commission or supercommittee. Camp sat on Obama’s debt-reduction committee in 2010 and voted against its recommendations. He was a member of the failed 2011 supercommittee.
Or a chairman can take matters into his own hands and push a bill through his committee, securing votes from rank-and-file members and making it awkward for leadership and the White House to ignore the results. So far, that’s Camp’s approach.
“There are multiple paths to get tax reform done,” says Sage Eastman, a Camp aide. “Anyone who thinks they know exactly which path it has to take or will take is being foolish.”
Instead of waiting for Boehner to negotiate a deal with the White House that would leave Camp to carry out instructions from above, he’s starting a process much like the one kids learn about in grade school.
“This is not writing the bill in a leadership office and rolling it out on the floor,” Camp says. “This is about building a bill, piece by piece, from the ground up.”
A successful effort in the House could push the administration to show leadership that has been lacking, said Michael Graetz, a law professor at Columbia University in New York.
“If you get a major tax bill that is voted on a bipartisan basis out of the House, then I don’t see how the White House can stand idly by and watch it move over into the Senate without entering the fray,” he said.
In February, Camp and Levin agreed to divide Ways and Means into 11 working groups, each led by a Democrat and a Republican and each assigned to study one piece of the tax code.
The groups have been soliciting input and drawing tax-break defenders out of the woodwork. Literally. The president of Millard Lumber in Omaha, Nebraska, wrote to defend last-in, first-out accounting, and the Wood Machinery Manufacturers of America pitched write-offs for capital expenses.
Camp set April 15 -- the same day individual tax returns are due -- as the deadline for individuals and businesses to submit comments.
Camp has released draft proposals for revamping narrow areas of the tax laws. Under his plan for overseas income, U.S. companies would receive a 95 percent break on their foreign profits in exchange for limitations on their ability to shift the money to low-tax countries.
His proposal on derivatives -- which Obama embraced this week -- would require investors to pay annual taxes based on changes in value, even if they hadn’t sold, which would make it harder for the wealthy to collect income through lightly taxed capital gains. Camp suggested tightening some of the provisions that lower the tax bills of businesses organized as partnerships instead of corporations.
Such changes would be the biggest in decades. Camp’s drafts so far represent a small portion of the law and aren’t fully spelled out.
“The important and tough choices remain very much unaddressed,” Levin said.
Camp says he’s getting there: The committee has held a hearing on charitable deductions, and he’s planning another on mortgage interest. He vows to get a bill out of his committee this year.
Texas Republican Representative Kevin Brady, who sits on Ways and Means, says over the past two years Camp has proved he can negotiate with Democrats on issues such as a payroll tax cut extension.
“There’s not a day that goes by that he doesn’t wake up asking, ‘How can I move fundamental tax reform forward,’ and then acting on it,” Brady said.
That includes meeting weekly with his Senate counterpart, Max Baucus of Montana, the Democratic chairman of the Finance Committee.
“I see this relationship to be very strong,” Baucus said. “Now, we may in the end reach an impasse. It’s possible there’s a disagreement. But the mutual respect is solid.”
That spirit of cooperation is important, said Bill Bradley, who helped forge the 1986 agreement when he was a Democratic senator from New Jersey. Bradley said Camp should unveil a specific proposal as soon as he can to clarify the debate and force “panic” among special-interest groups.
“There’s got to be trust,” Bradley said. “And if there’s not trust then you can’t deal with anything complex or anything that is controversial, because then you’re the prisoner of the special interests that will go out and yell the loudest.”
A little mutual respect and trust can go a long way. In 1996, President Bill Clinton twice vetoed Republican bills to change the country’s welfare programs. On the third try, a Republican who’d helped to write the bill persuaded Newt Gingrich to drop cuts to Medicaid, and Clinton signed the bill.
The congressman was Dave Camp.
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