ICYMI: Tax Reform Déjà Vu
By Bruce Thompson
House Ways and Means Committee Chairman Dave Camp, R-Mich., has unveiled his Tax Reform Act of 2014, the most comprehensive tax reform proposal in nearly three decades. The Camp plan is a bold, even radical, proposal which has shocked many members of Congress on both sides of the aisle and outraged many business interests.
The Camp plan is an impressive blueprint for how to simplify the tax system, reduce tax rates, reform our international tax rules and broaden the base by closing a long list of tax loopholes.
The need for major tax reform is acknowledged by most economic and tax policy experts. The U.S. corporate tax rate is the highest in the industrialized world, international rules impede our global competitiveness, and the combination of high tax rates and too many deductions, exclusions, and carve-outs impedes economic growth and job creation.
Yet despite the obvious need to reform our broken tax system, the prospects for the Camp tax reform plan have been dismissed out of hand.
Members of Congress, from both parties, have dismissed the chances of major tax reform passing.
The Washington Post said the Camp plan “has basically no chance of passage.” Other Washington pundits have declared the plan “dead on arrival.”
But Camp’s plan is not the first tax reform plan to be declared DOA.
The exact same negative reaction occurred back in 1984 during the Reagan Administration, when the Treasury Department’s tax reform plan, referred to then as Treasury I, was released.
Like the Camp plan, the Treasury proposal was a comprehensive tax reform plan that reduced tax rates and repealed or revised popular deductions, exclusions, and credits. Just like the Camp plan, the reaction to Treasury I was both negative and dismissive.
Republican and Democratic Members of Congress were stunned. Business groups were outraged, and Wall Street was furious.
An article in the New York Times said there was “no chance it will pass.” A Los Angeles Times article said tax reform was “doomed to fail.”
But a funny thing happened. Public opinion polls showed strong support for tax reform. Republicans liked the lower tax rates, and then-House Ways and Means Committee Chairman Dan Rostenkowski decided Democrats could not allow Republicans to steal the issue and put Democrats in the position of supporting special interest loopholes and the status quo.
Bruce Thompson is a senior policy advisor at DLA Piper who served in the Treasury Department during the Reagan Administration and played a key role in the enactment of the 1986 Tax Reform Act.