ON CONGRESSMAN CAMP'S BOLD TAX REFORM PLAN

If you are like me, you had probably never heard of Congressman David Camp before last Wednesday. He is a Republican from Michigan, Chairman of the powerful House Ways and Means Committee.  

On the same day I was publishing a blog berating the laziness of Americans, this American proved he is not one of those lazybones. This Congressman had been working hard, according to The Washington Post.  For the last three years he had been leading the most gruesome, most boring, most thankless job a Congress member can tackle. He was revising the U.S. Tax Code.

This is a job that if you asked any American if it needed to be done, he or she would respond, no matter what their political persuasion, by asking, "What is taking them so long?" So, what did the Congressman come up with? Here are some highlights taken from a number of sources.*

1. Eliminates 228 sections of the Tax Code.
2. Reduces tax brackets from 7 to 3 for individuals and married couples. The brackets would be 10% for single individuals with incomes up to $35,600, $71,200 for married couples; going up to 25% for incomes up to $400,000 for individuals, $450,000 for married couples.  A ten percent surtax would apply to all income over $400,000 for individuals or $450,000 for married couples. The current highest tax bracket is 39.6%.
3. Reduces corporate taxes from 35% to 25%.
4. Raises the individual Standard Deduction to $11,000 for single filers (now $6,100), or $22,000 (now $12,200) for married couples. It raises the Child Tax Credit from $1,000 per child to $1,500 and increases the age limit to 18 from 17. The Plan repeals the $3,900 Personal Exemption.
5. Investment income, now taxed as capital gains, will be taxed as regular income with the first 40% of this income exempt from taxation.
6. Deposits in 401 (k) plans and IRAs would have no yearly cap. However, only the first $8,750 could enter these plans tax free. Any savings over that figure would have to be deposited into a Roth IRA. Roth deposits are taxed before you save and are tax free when you retire.
7. The mortgage interest deduction, now available on loans up to $1,000,000, will now be reduced to include interest on amounts up to $500,000. The previous $1,000,000 loan interest deduction will be grandfathered in for loans already in effect.
8. Local and state taxes will no longer be deductible.
9. The value of itemized exemptions allowed will be limited to 25% of income.  
10. Charitable giving must exceed 2% of income to enable a deduction.
11. The Earned Income Tax Credit would be changed and limited.
12. Some interesting corporate changes include: a "too big to fail" tax for banks of 0.035% for assets in excess of $500 Billion; elimination of depreciation on corporate jets; hedge fund managers and private equity firms will no longer have income treated as "carried interest" and taxed like capital gains, but will be treated as ordinary income; and elimination of the "Obamacare" medical device excise tax of 2.3%.

I am sure this is not a perfect plan.  I do not believe anything is capable of perfection. This is, however, a well thought start to solve a complex problem.  It has both reduction in taxes and tax increases.  This plan increases deductions for some, while reducing deductions for others. Congressman Camp estimates that 95% of those filing will use the standard deduction only to file, thus reducing paperwork for everyone. He says that 99% of the U.S. population will pay 25% or less in Federal income taxes.

The IRS code in the USA needs drastic overhaul. Special-interest groups have codified their special needs without concern for other sections of the code or the overall needs of the country.

So, what has Mr. Camp's hard work gotten for him?  It seems the wrath of everyone living and working within the Capitol Beltway is being directed at the man. According to The Washington Post his fellow Republicans, Mitch McConnell, Senate Minority Leader, and John Boehner, House Speaker, said there is no way this plan will be put to a vote this year.

The Philadelphia Inquirer quoted Guggenheim Partners' Chris Kreuger as giving the plan, "...a D-minus on timing and politics."**  Democratic Senator Chuck Schumer from New York called the plan, "...dead on arrival," according to the Tampa Bay Times.***  The number of special interest groups screaming bloody murder is mind boggling. Hedge fund managers, private equity firms, bankers, realtors, home builders, and more are up in arms already.

The media loudmouths will pick this plan apart to anger you and get your blood boiling.  They will say it helps the rich, destroys the American family, aids the poor on the backs of the rich...you know, all the crap you have heard before. Do not believe all you will hear.

Since it was just released and is, according to philly.com, 979 extremely detailed pages, I doubt if any of the people calling for Camp's head have actually read the entire plan. It appears lobbyists and Congress picked through looking at what it might do to their favorite deduction, be it for mortgage, healthcare, moving expenses, corporate jet depreciation, earned income tax credit, investment income or all of the above.

The fact that Mr. Camp has managed to make everyone angry...the right and the left, Democrats and Republicans...means his plan must be damn close to balanced. Everyone must feel the pain for this type of change to be effective. Republican Paul Ryan of Wisconsin always talks about lowering tax rates. Republican Camp showed how to cut the tax rates, while putting specifics on the table to help the average taxpayer.

And, how does this life-long Democrat feel about this plan? I am giddy.  Any tax revision plan that can make so many people upset has done exactly what it is supposed to do, revise the tax code. The fact that it took a Republican to do so makes no difference to me. The party of "NO" finally has a member who said, "YES!" 

For true tax reform, we must all be forced to give up something.  If 99% of the people know the most they will pay is 25%, that's a pretty big deal. Tell your Member of Congress and your Senators to get this bill on the floor so it can be debated and discussed and formed into a law.

*In order to provide the details of the Camp Plan I have read and taken information from articles produced by the Tampa Bay Times, Philadelphia Inquirer, philly.com, The New York Times, The Washington Post, USA Today, The Los Angeles Times, Forbes magazine, CNN Money, Business Week, and NPR.  I thank all of them for allowing me to read their reports.  Any errors in my list is a result of what has been printed to date.

**Chris Kreuger's full quote, "An A-plus for effort and public policy...but close to a D-minus on timing and politics."

***Senator Chuck Schumer's full quote, "Any proposal that eliminates the deduction for state and local taxes, as the Republican plan would do, is dead on arrival."