Portman referred to his “Jobs for America” proposals as a blueprint for governance, not just tax reform. The plan includes a number of promises about deficit reduction, healthcare reform, deregulation, and the Keystone pipeline. It would restrict the president’s authority to issue executive orders without congressional approval if the new rules would affect the economy by more than $100 million. The energy component focuses heavily on opening new areas for exploitation, including the offshore continental shelf and federal lands. Portman promises that the Senate Republican plan will increase jobs and economic growth, a familiar refrain from almost everyone pushing fiscal programs right now.
Portman has a reputation for being savvy on taxes. He coauthored the 1998 IRS Reform and Restructuring Act and sat on Ways and Means. So when his name is attached to a tax reform plan, it brings credibility and hope. Unfortunately, his latest plan is a disappointment. Besides lacking details, it reads more like Republican campaign talking points than a serious attempt to pick up where former Senate Finance Chair Max Baucus left off when he went to China.
There are five points in the subsection of the Jobs for America text that deal with taxes. One calls for repeal of the “death tax,” something that Republicans mention at every opportunity even though the tax has been gutted by repeated lowering of the rates and raising of the exemption levels. The American Taxpayer Relief Act of 2012 permanently reinstated the estate tax with a rate of 40 percent and an exemption level of $5 million. While that was slightly higher than the 35 percent rate for 2012, it was far short of the return to the Clinton-era estate tax that many Democrats supported. Repeal of the estate tax is unlikely to do much to create jobs or help economic growth because the tax affects only a very small number of taxpayers and raises little revenue.
Portman also calls for maintaining lower rates on capital gains and dividends. While this is a clear statement in support of a capital gains preference, it’s not clear what rate Portman is pushing. He doesn’t specify whether he means rates lower than those under current capital gains taxes or lower rates than whatever the ultimate individual and corporate rate ends up being in the future. He probably means the latter, but it’s possible this is also a veiled attack on the net investment income tax that is part of Obamacare.
Portman delves into the minutiae of the extenders debate by calling for a permanent research credit and a permanent small business investment tax incentive. A permanent research credit is the dream of many in Washington and will probably be part of any tax reform plan (although the Camp draft scales back research incentives while also making the credit permanent). Like most research credit advocates, Portman points out that permanence would increase the effectiveness of the incentive by providing certainty.
The longest proposal in the blueprint involves simplifying and reducing corporate and individual taxes. Portman doesn’t back a specific rate, but he cites a 25 percent top rate as an example of a change that could create millions of jobs. He proposes moving to a territorial system for international taxation (about the most technical language in the entire plan), but he doesn’t discuss transition rules or base erosion concerns. He suggests fewer deductions and credits as part of rate reform, but, like everyone other than Camp, he doesn’t specify which tax expenditures for individuals or business he’d be willing to trim.
Portman is a serious lawmaker. He has worked with Democrats in the past and has quickly gained a solid reputation in the Senate. He’s been mentioned as a possible vice presidential candidate and will almost certainly be a key voice and vote if tax reform ever makes much headway (particularly if the GOP retakes the Senate this fall). Seeing Portman’s name attached to a tax reform proposal should generate excitement, but the Jobs for America blueprint does almost nothing to help Camp’s efforts or help advance reform. Let’s hope Senate Republicans have something else in mind if they end up controlling the Finance Committee next year.