Government & Politics

Setting Up Camp for Tax Reform

Feb. 27, 2014
Simplifying taxes

“There have been so many changes to the tax code over the past decade that it is now 10 times the size of the Bible, but with none of the Good News,” jokes House Ways and Means Committee Chairman Dave Camp (R-MI) in a Wall Street Journal op-ed laying out his new tax plan. Camp has been working for three years on a proposal to overhaul the tax code, which hasn't been done since 1986. As The Heritage Foundation's Stephen Moore notes, “Since then, year after year, the tax code gets engrafted with more special interest loopholes, credits, and carve-outs. Not only is this unfair to those without lobbyists, it makes the tax code mindlessly complex – a job security program for tax lawyers and accountants.”

There are currently seven individual tax brackets with a top individual rate of 39.6%, while the corporate rate is 35%, the highest in the industrialized world. Camp proposes just two individual tax rates – 10% and 25%, though there would be a 10% surtax on some annual income above $450,000 for joint filers, making an effective third rate – as well as a corporate rate of 25%. Capital gains and dividends, excluding the first 40% earned, would be taxed like ordinary income at the individual rates. Camp's surtax makes the top rate far too high and is an ill-advised sop to the Left, but, overall, the plan is an improvement.

In exchange for lower rates, many deductions and credits are reduced or eliminated. But the standard deduction is raised so that an estimated 95% of filers will claim it. Camp explains, “The guiding principle is that everyone should play by the same rules – your tax rate should be determined by what's fair, not by who you know in Washington.”

The trouble is that Democrats – and a great many Republicans – prefer to use the tax code to reward constituency groups with tax deductions and credits. And every such item in the tax code has its very own lobbying group. For example, Camp's plan keeps the popular and lobbied-for mortgage interest and charitable giving deductions. Democrats also view the tax code as the best way to “level the playing field” by taking wealth from the haves and redistributing it to the have-nots.

One of the virtues of Camp's plan is that more people would have “skin in the game” – they would pay taxes to fund the big government they so love. Many of them wouldn't love it nearly so much if they got the bill. But that feature is also its greatest handicap, because Democrats will campaign against “Republican tax cuts for the rich on the backs of the poor.” History, however, shows that lower rates yield higher revenue and a greater share paid by the “rich.”

While Democrats want to raise taxes on the “rich” so they can steal more income (at least in the short term), Camp says under a static analysis his changes would be revenue neutral. Lower rates will result in economic growth, accompanied by nearly two million more jobs and rising wages. According to the Joint Committee on Taxation, the plan would increase GDP by 1.5% – or about $3.4 trillion – over the next decade. All of which means it could raise as much as $700 billion in extra revenue over 10 years.

Despite the fact that Camp's plan has no chance of passage with the present makeup of Washington, we sure could use some economic growth after five years of the anemic Obama “recovery.” A positive agenda like this should be welcome this election year.

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24 Comments

Pete in Tulsa said:

I do not understand this obsession with reducing the number of rates. If we are not going to have only one rate - flat tax - then we should have almost an infinite number of rates. If the rate jumps from 10% to 25% at some income level then that means the additional dollar of income is taxed at two and a half times the previous dollar. The rate should either be flat or rise in small increments from the minimum to the maximum. It is not the number of rates that make the tax code complex - you read your tax from a table - but the overlapping credits and deductions and the convoluted rules for eligibility. Eliminate most or all of them and then let the rate start at 1% and move us to 25% in 1% increments.

Thursday, February 27, 2014 at 11:31 AM

wjm in Colorado replied:

The incremental rate is a tenent of Marx, and the Communist Manifesto, and is neither fair nor equitable. ONE RATE, everyone pays, and no deductions. This would negate the need for the IRS and their gestapo tactics.

Thursday, February 27, 2014 at 12:00 PM

DrThunder in York PA replied:

Absolutely. I'm in favor of the fair tax; see www.fairtax.org because everyone has skin in the game, and there is no way to cheat. It's a national sales tax collected at the register, just like state sales tax. This captures tax from illegal aliens, rich and poor, everybody. Best of all, it eliminates the Gestapo IRS!

If a flat tax is what you want, then 10% should be the absolute maximum. It's good enough for the Creator of the universe, after all. The problem is, there is still the Gestapo to deal with, and Congress gets to play favorites with deductions, exemptions, etc. That's why I l favor the Fair Tax.

Thursday, February 27, 2014 at 8:48 PM

Ricker in Keswick VA said:

Please champion The Fair Tax Act (H.R. 25) and a book by Boortz on that subject. It is brilliant -- eliminates income tax, estate tax, withholding tax, corporate income tax (making the USA a tax haven for all businesses) and, best of all, the IRS, in favor of a national 23% sales tax. Hey, even illegals will have to pay it. There are refunds for the poor and other qualifications.

Thursday, February 27, 2014 at 11:38 AM

Jerry in Florida replied:

Ricker, Isn't it mind boggling that people continue to toy with the tax code instead of just getting rid of it all together. How far into insanity must one go before they finally say enough is enough? Like Boortz, I refer to it as the "Stockholm Syndrome" of taxes.

Thursday, February 27, 2014 at 12:33 PM

wjm in Colorado said:

The tax reform that would enable further reform, is to make the requirement to vote, would be a person who is Paying not Collecting. Those who don't pay shouldn't be allowed to vote themselves others money. Of course that would quickly end the treason and controll of the Marxist Democrat Party.

Thursday, February 27, 2014 at 11:58 AM

richard ryan in Lamar,Missouri said:

Repeal the 16th amendment and abolish the IRS, which would eliminate two evils at the same time. Institute a national sales tax, with no carve outs or rebates. That way everyone, including illegals and welfare leeches will have a dog in the fight. This is the one and only fair way to do things. I am 81 years of age and exist entirely on SS. I don`t have enough income to pay income taxes, but I am still in favor of a national sales tax.

Thursday, February 27, 2014 at 12:38 PM

PJR in Easton Pa. said:

Here we go again, trying to adapt progressive policies to create the illusion that foundational values prevail. Nothing could be further from the truth. Our founders were unalterably opposed to a personal income tax, capital gains and estate taxes. Their vision was government financed by low level taxes on economic activity. Individuals were exempt from direct taxation by the Federal government so that they could preserve their wealth for their posterity. Unless and until we restore the foundational concept of taxing economic activity, tax reform is nothing more slight of hand trick performed by a incompetent magician.

Thursday, February 27, 2014 at 12:46 PM

Kelly Jarboe in Blue Springs, MO said:

Why not do the best thing, Abolish the IRS, and Adopt the Fair Tax System. This system is the most particle one offered but the Congress don't like it because it is fixed and not so easy to get their thieving hands on it. Plus it is so simple that a High School even in todays dumbed down educational system can understand it.

Thursday, February 27, 2014 at 12:49 PM

GoneToTexas in Allen said:

Overhaul the Tax Code! We have been down this road before-nothing really changes. I think we need to change from taxing income to taxing consumption. The "Fair Tax" does this. It also broadens the tax bases so that everyone pays. Granted the prebate in the Fair Tax gives the poor money to pay taxes however they would hand over the cash and be made aware of how much the government is costing them. At least some transparency!

Thursday, February 27, 2014 at 1:27 PM

Richard Arena in Roswell, Georgia said:

What's needed is a new tax system that eliminates the need for Uncle Sam to sit in judgment of what citizens do with THEIR money. The one way to do that is through a consumption tax.
As long as there is an income tax the potential for abuse exists, and where the potential exists, as experience illustrates, it will come to pass.

Let's repeal the 16th and institute a national consumption tax.

Thursday, February 27, 2014 at 1:37 PM

G K in Carlsbad said:

Is there an economic reason for corporate tax? I don’t see it. All income is taxed at some point. Business profits cannot escape forever. The only reason I see for having a tax on corporations is political – a controlling mechanism, paid for by consumers.

Thursday, February 27, 2014 at 2:28 PM

wjm in Colorado replied:

Businesses don't pay taxes, their customers do.

Thursday, February 27, 2014 at 4:09 PM

Ed in Boulder City said:

Flat tax rates are the only answer, but the corrupt Roman Senate will never adopt them.

Thursday, February 27, 2014 at 2:50 PM

Jerry in Florida replied:

The Flat tax doesn't repeal the 16th amendment. The Fair Tax does.

Thursday, February 27, 2014 at 4:11 PM

Ken F in Coastal NC said:

A great string of posts! Kudos to all of you patriots. The FairTax is clearly the way to go:
It gets the Federal Government out of your personal business. The IRS is shut down. The 16th Amendment (which allowed income based taxes in the first place) is wiped out by a new nullifying amendment.
The states collect the sales tax and then pass it to the Federal Government. (though not part of the currently proposed legislation, I say the states deduct the cost of any federal mandates prior to submitting the money to the feds.)
Every family gets a pre-bate check that is equivalent to the sales tax that a family at the poverty level would pay. Hence, for families at or below the poverty level, there is no effective tax. The beauty of this strategy is that the government does not need access to your income data to determine eligibility.
In addition, I am convinced that every citizen will see him or her self as a "taxpayer", even if the pre-bate is offsetting all or some part of their tax liability. And this will scare the pants off the democrats!
Everybody who consumes pays! No freeloaders, unless you want to count those below the poverty level which we are going to support in any case.
Businesses do not pay a tax under this proposal. As we all know businesses pass their taxes directly to the consumer anyway. The FairTax makes US businesses much more competitive in the world market and brings hundreds of thousands of jobs back to this country.
And here is the kicker; 90% of those in Washington will not accept the Fairtax until it becomes clear that their constituents demand it!! It’s simple. The FairTax removes tremendous power from Congress and decimates the lobby industry in Washington.
Read Neal Boortz and John Linder's book "FairTax: The Truth". Support 2014 candidates who endorses the FairTax.

Thursday, February 27, 2014 at 2:56 PM

John Barrett in Marietta, GA said:

Somebody up there read the FAIR TAX bill. It is the most researched tax bill in the history of our Congress

Thursday, February 27, 2014 at 3:10 PM

budlangpapa in Texas replied:

Haven't you heard? They don't read bills they just pass them. Of course we will then find out what is in them and if we are lucky a few good ones will slip in. But don't count on it.

Thursday, February 27, 2014 at 7:36 PM

Lowell in Johns Island said:

Any tax reform should make the IRS answer taxpayer questions within a reasonable time - one work week for example - AND the IRS should be obligated to stand by their answers. For example if one IRS agent tells you you don't have to report X, another agent cannot tell you something different and if you are audited the answer holds the IRS responsible.

Thursday, February 27, 2014 at 4:55 PM

budlangpapa in Texas said:

The tax code will never see change. It is far too valuable a tool for often unaccountable spending and the oversight and control of the taxpayer. They talk about change to make you feel good but think about how that has been used in almost every campaign for the past number of decades. when talking about revising tax laws many politicians are like the old adage (not true about some) about car dealers - "If their mouth is moving they are probably lying."

Thursday, February 27, 2014 at 7:34 PM

Dave Mather in Troy, MI said:

Simplifying the tax code would be easy. The hard part would be to make it fair to everyone and work out something to employ all the people that do taxes or find something else to supliment(sp?) their income.

Thursday, February 27, 2014 at 10:25 PM