Camp Presses U.S. Code Rewrite as Policy Divide Widens

With the partisan divide widening in Washington, Dave Camp’s job is getting tougher.

The chairman of the House Ways and Means Committee wants to rewrite the tax code even as Democrats and Republicans disagree about how much money the U.S. government should collect. Some fellow Republicans say now isn’t the time to pursue an overhaul amid the bickering over budget cuts.

“I’m not naive about how difficult this is and how complicated this is,” he told reporters in his office near the House floor yesterday. “But it’s something that’s going to be important to do if we want to grow the economy and create jobs.”

Camp’s biggest obstacles include companies that rely on long-standing tax breaks, Democrats who are seeking to raise revenue through a tax code rewrite and Republicans wary of what an eventual deal with President Barack Obama would require.

Camp, a Michigan Republican, wants his committee to pass a bill by the end of the year that would raise just as much money as the current tax system generates. He hasn’t set a schedule for releasing a full draft, and he deflected questions yesterday about which tax breaks he would cut and how he would overcome the political challenges.

Camp has offered parameters that are guiding him and the committee. He said he is seeking to reduce maximum rates as much as possible with a goal of 25 percent for individuals and corporations.

Corporate Taxes

He wants changes in the corporate tax system to pay for themselves and changes for individuals to do the same. He says the progressive form of the resulting tax code will “closely resemble” today’s system without identifying a specific target.

“I’m not going to make a strong commitment on that right now,” he said yesterday.

Camp, 59, has released draft proposals for changing how the U.S. taxes foreign income and financial products. He created 11 bipartisan working groups on his committee on subjects such as charities and energy and asked them to report back with ideas and research by April 15. Those groups have already started meeting.

Camp’s task is complicated by the fact that Democrats oppose the revenue-neutral rewrite he wants. Obama and House Speaker John Boehner came close in 2011 and 2012 to a so-called grand bargain that would have included a revenue-raising tax code and cuts to entitlement programs.

Those efforts, had they succeeded, would have set a revenue target and assigned congressional tax writers the difficult job of working out the details.

Spending Cuts

Instead, Congress cut spending in 2011 and voted to allow a $630 billion tax increase on Jan. 1. Obama and Democrats say they want more revenue from curtailing tax breaks to go toward deficit reduction or to prevent further spending cuts from taking effect on March 1.

Republicans refused, saying the debate about the revenue level is closed.

That gap creates a potential problem for Camp’s attempt to move a revenue-neutral bill through the House. Advancing such a plan carries political risks, because Republicans might vote for a bill that curbs popular tax breaks, and then Senate Democrats may add more revenue.

“We’d love to do tax reform,” Boehner said Feb. 12 in describing some Republicans’ reluctance. “But why go through all that effort if it isn’t going anywhere or why go through that effort if the outcome would be unacceptable?”

On Verge

In a speech yesterday, Boehner said he hoped “we are on the verge of moving a tax reform bill that will lower rates for all” and “clean out the loopholes and some of the nonsense that’s there.”

Boehner has reserved the bill number H.R. 1 -- a signal of his party’s priority -- for Camp’s legislation and said in prepared remarks that he didn’t deliver that he would “fully support” Camp’s efforts.

Camp said Boehner has given him a “green light.”

Though it’s the right policy, trying to rewrite the code would create uncertainty for investors and work against Republicans’ strategic interests, said Representative John Campbell, a California Republican.

“It would be very difficult and probably not a good strategy to pursue major tax reform,” he said in an interview yesterday, noting that Obama wants to curb tax breaks separately from an overhaul. “Until the president is willing to consider those things in the context of lowering rates, we should not be going down the road.”

Itemized Deductions

Representative Sander Levin, the top Democrat on Ways and Means, said lawmakers should be wary of major changes to popular itemized deductions that aren’t really loopholes.

“We need to do tax reform but in a careful way,” the Michigan Democrat said at a Bloomberg Government event yesterday. “We need to look at these so-called tax preferences in a careful way.”

Camp rejected calls from Obama and Democrats to raise new tax revenue now to delay the federal spending cuts.

“The code is a huge drag on the economy as it’s currently configured,” he said. “So one or two loopholes isn’t comprehensive tax reform.”

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