House Ways and Means Chair Dave Camp, R-Mich., would require derivatives to be marked to market at the end of every year. That is the centerpiece of Camp’s latest tax reform discussion draft (which also includes relief for homeowners and several other taxpayer-friendly provisions). After resisting even the milquetoast reforms of Dodd-Frank, House Republicans are now expected to get behind a plan that would require the financial sector to contribute significant new revenue. The reason, according to The Huffington Post, is that Republicans, and Camp in particular, are angry at the CEOs and other financial sector leaders who got behind the Fix the Debt group, which pushed the GOP to accept higher taxes in exchange for a grand bargain on deficit reduction.
The Huffington Post story, by Ryan Grim and Zach Carter, relies heavily on unnamed Republican sources. (Is there any other kind of source anymore?) It lays out a case for Republican ire at the business community, starting with a sharp letter sent by Camp and Senate Finance Committee ranking minority member Orrin Hatch of Utah. In the letter, Hatch and Camp explained that there wasn’t enough revenue possible from the reforms President Obama was pushing (higher rates on wealthy taxpayers) to pay for the plan the CEOs backed. The Republican lawmakers told the Business Roundtable it would need to sacrifice some of its own favorable tax rules in any larger deficit reduction package. According to Grim and Carter, the group balked at that proposal, leading to bipartisan distrust of the group on Capitol Hill.
Rachel Maddow was quick to seize on the Huffington story as a sign of the fracturing alliance between business and what she called the “reckless” Republican Party, an angle also explored by Joseph Thorndike in Tax Notes. Maddow goes further, implying that Camp’s proposal isn’t serious and is simply meant to get the business community back in line to support GOP priorities. Saying that even if Camp were to push the bill, other Republicans would kill it, Maddow writes, “The bill, in other words, is intended more as a brush-back pitch than a meaningful policy proposal.”
Maddow is wrong. Whether the Camp proposal becomes law or not, the Michigan lawmaker has shown he is serious about tax reform. It is ridiculous to suggest that he would put out a discussion draft on derivatives tax reform that he doesn’t actually support. Camp’s latest draft mirrors his approach to international taxation and his proposal to move the United States to a territorial system. He was certainly serious about that plan, and it is doubtful that he would risk his reputation or the momentum he’s trying to establish for a tax system overhaul by pulling a Mitch McConnell (proposing a bill he hopes will fail), which the Senate minority leader did during the Bush tax cut debate.
But what about the broader point? Is the Camp draft punishment for the financial sector’s cozying up with Obama? There’s no doubt that Republicans felt betrayed by their business allies during the fiscal cliff showdown. But derivatives are unpopular in Washington, and any tax reform plan will have to raise some revenue, particularly if individual rates are going to go down. While Camp might have been more inclined to support higher taxes on the financial sector after December 2012, the foundation for his latest proposal was actually laid over a year before the fiscal cliff debate. Camp and Finance Committee Chair Max Baucus, D-Mont., held a joint hearing on the taxation of financial products in December 2011. During the hearing, Baucus and Camp decried the riskiness of derivatives, and lawmakers and witnesses discussed a mark-to-market regime in detail.
Perhaps before Maddow and The Huffington Post accuse Camp of acting petulantly, they should do a little research on the history of his proposal.