The Question of Reform


Dave Camp: Is Tax Reform Politically Possible?

He may be the last optimist in Washington, but the House Ways and Means chairman says the need for faster economic growth and some cultivated bipartisanship can fix the tax code.    


The 1986 tax reform eliminated most special-interest deductions and loopholes, lowering the top income-tax rate to 28% from 50%. Harvard economist Dale Jorgenson says the gains to economic growth from the lower rates and the simplified code increased GDP by more than $1 trillion, and that a similar reform now could increase national wealth over the long term by $7 trillion in net present value.


But in the 1990s and 2000s Congress began tinkering again, a lot of the junk removed from the code "has been put right back in," and tax rates started rising. Mr. Camp's calculates that "we've made 5,000 changes to the tax code just in the last 10 years." He says the whole system is so complicated that even the corporate lobbyists who form long lines outside his office seeking tax favors "are now telling me, 'Please fix the code. Give us less paperwork and a 25% rate and we'll gladly give up our loopholes.'"


Although he likes the flat tax that Steve Forbes popularized 16 years ago, his draft plan calls for two rates—10% for most Americans and 25% on six-figure earners and above. To ensure that tax reform gets a fair hearing, he says Republicans plan to create a "fast-track" authority so that the compromise doesn't get bogged down in committees and is assured an up or down vote on the House floor.


"We're not competitive on taxes anymore, especially in terms of international tax," he says. "We've got the highest corporate rate in the world, and we're the only country left with a world-wide system of taxation. We need to be on the cutting edge of tax and economic policy in the world so that we're the center of innovation, effort, growth, jobs."



What reform makes sense?