House Ways and Means Committee Chairman Dave Camp has released his long-awaited tax plan and it is an impressive piece of work. It lowers rates, broadens the base, and closes loopholes in a revenue-neutral way that keeps a similar progressivity to our current tax system. It effectively creates three tax brackets at 10 percent, 25 percent, and 35 percent and lowers the corporate tax rate to 25 percent. It’s exactly the type of conservative tax reform that Republicans have been touting for years. So why are so few Republicans coming out in support of it? Why are so few conservative news sites promoting it?
For instance, Breitbart News has nothing on its home page on it. Drudge has one link to it. National Review only links to Camp’s own Wall Street Journal article from Tuesday night. American Enterprise Institute’s James Pethokoukis has an article on Camp’s treatment of the mortgage interest deduction and Townhall’s Kevin Glass says that it “fulfills a lot of promises.” The Washington Examiner's Phillip Klein calls it "a step in the right direction." But in general, it’s not taking the conservative world by storm. Yesterday, before Camp even unveiled his plan, House Minority Leader Mitch McConnell said he saw "no hope" for tax reform.
This perfectly encapsulates how how hard it is for Republicans to create a tax plan that adheres to their principles. Camp’s plan has a lot for conservatives to like. It drastically lowers both individual and corporate tax rates and repeals the alternative minimum tax. It increases the child tax credit and standard deduction and eliminates numerous deductions to simplify the code. The Joint Committee on Taxation’s score of the plan says it will increase growth and jobs. That checks all of the conservative boxes.
But then there are things Republicans won’t like. It taxes capital gains as ordinary income—although 40 percent can be excluded for tax purposes. It imposes a new tax on too big to fail banks. It keeps the 3.8 percent tax on investment income that the Affordable Care Act created and eliminates the deduction for accelerated depreciation. It gradually lowers the cap on the mortgage interest deduction from $1 million to $500,000.
If you look at all those things that Republicans won’t like, there’s one overarching theme: They increase revenue. Camp kept his plan revenue neutral, but in order to do that and lower rates, he had to find other revenue sources. That ensured that almost every Republican could find something in the plan to oppose. In an election year, most congressional Republicans see nothing to gain by supporting a doomed plan that will anger their constituents and provide campaign fodder for their election opponents. Thus, few have come out in favor of it.
Camp’s plan has its flaws. For one, any tax reform will need to raise revenue; baby boomers are retiring and that’s going to require more government spending. It also could stand to be more progressive. But Camp has managed to put actual legislation behind the Republican tax mantra and showed that it was mathematically possible to lower rates, close loopholes, and keep it revenue neutral without screwing over the lower- and middle-class. That’s quite a feat, even if Republicans won’t openly say so.