Tax Analysts Blog

Camp Waves the White Flag

Posted on Jun 3, 2014

After years of work and months of anticipation, House Ways and Means Committee Chair Dave Camp, R-Mich., released his comprehensive tax reform draft in February. Even though several detailed proposals on aspects of tax reform had already been released, the complete plan contained a number of surprises -- surprises that didn’t sit too well with business groups, lobbyists, and, most importantly, Camp’s fellow Republicans. After insisting for months that he wouldn’t move any tax legislation unless it was a tax reform bill, the chilly reception to his draft finally seems to have caused him to cave in.

The signs of Camp’s surrender have been evident for a while. He had not allowed the Ways and Means Committee to take up any consideration of extenders after the passage of the American Taxpayer Relief Act of 2012. But pressure from business groups, the Senate, and Camp’s own caucus led to Ways and Means marking up a series of bills that would permanently extend several temporary tax provisions. Ways and Means and the full House have already passed a permanent research credit (a tax benefit that Camp’s draft radically changed), and last week the committee examined permanent extensions of bonus depreciation and several extenders regarding charitable giving.

“We are making progress on tax reform,” Camp said May 29. “It may not be in a complete bill, but this is incremental progress.” It is very incremental progress. Camp’s original draft involved tax changes that totaled trillions of dollars, all while overhauling the corporate tax system and the individual income tax rate structure. Extenders are mostly targeted tax provisions that affect only small numbers of taxpayers or narrow aspects of tax law. It’s a major step back for Camp in his last year in Congress.

Ways and Means member Charles W. Boustany Jr., R-La., said committee Republicans are trying to help set the stage for tax reform in the next Congress. “The last thing we want to do is piecemeal tax reform, but we're trying to make a calculated decision on how do we set this thing up, to move a big tax bill down the line,” he said. That’s a more sanguine analysis than Camp’s concession that extenders bills represent incremental reform, but it’s also a curious assertion that bears some examination.

Permanent extensions of extenders without offsets would redefine the revenue baselines for a future Ways and Means tax reform bill. It would become less costly to produce a revenue-neutral bill that lowers individual tax rates to 25 percent, because the research credit, bonus depreciation, and other provisions will be part of the code, rather than having to be added back into a reform bill at considerable cost. It’s budget semantics (something the GOP harps on all the time), because nearly everyone in Washington knows that most extenders will be extended, typically for one to two years at a time. But any amount of revenue savings helps, particularly because Camp essentially failed in his goal to lower rates to 25 percent (the surtax on the rich is essentially a higher tax bracket) and stay revenue neutral. Camp has spent the last months insisting he should have permission to change the baseline because Democrats in the Senate are pushing an extenders bill that isn’t paid for (never mind that the Senate Finance Committee bill is for a temporary, and not a permanent extension).

However, Camp’s quest for a new revenue baseline that includes permanent extenders is important really only to Camp, which casts doubt on Boustany’s assertion that the next Congress will benefit from Ways and Means’ work this year. No future chair of the committee, whether Republican or Democrat, will be bound by Camp’s promise to hit a 25 percent rate and keep the overall reform package revenue neutral. So Camp’s push to get permanent extenders into the code to make his version of tax reform cheaper is the quintessential “day late, dollar short” effort. If permanent extenders would have made tax reform so much easier, the chair should have been pushing for them last year, instead of touring the country with Max Baucus in a quixotic quest to drum up public support for an esoteric reform package that didn’t even materialize until February.

And that’s why Camp’s latest efforts can’t be cast as anything other than a total defeat for his grand plans to reform the tax code. It’s the death knell for his vision, no matter what kind of spin he tries to put on it. Camp tried to reform the tax system -- and failed. Passage of a few permanent extenders bills probably isn’t how he envisioned spending his last few months in Washington.

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