House GOP to Unveil Tax Reform Proposal

Plan would institute top tax rate of 25%, but detail still to emerge

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Before House Ways and Means Chairman Dave Camp ends his term in 2015, he will leave behind a years-long effort to reform the nation’s tax code. His proposal, set to be released Wednesday, will call for drastic cuts to the personal and corporate tax rate and the end of some deductions.

Camp laid out the bare bones of his plan Tuesday night in an op-ed in the Wall Street Journal. “Over 99% of tax filers will face a top tax rate of 25%,” he writes, down from a top individual tax bracket of 39.6% and a top corporate tax bracket of 35%. Camp would impose a 10% surtax on certain types of earned income over roughly $450,000 a year, according to an analysis by the Washington Post. The proposal would also tax capital gains and dividends like ordinary wage income, but 40% would be excluded from income for tax purposes, according to the Journal. Camp claims the plan would unleash economic growth.

“After this streamlining of the tax code, the size of the economy will increase by $3.4 trillion over the next decade, or roughly 20% compared with today,” he writes. “This will lead to nearly two million new jobs—and producing up to $700 billion in additional federal revenues that can be used to lower taxes even further or reduce the debt.”

Tax experts are eager to see how exactly Camp supports his claims. “The key is always in the details,” says Roberton Williams, a Senior Fellow at the non-partisan Urban-Brookings Tax Policy Center, who notes that the growth projections in particular are “always uncertain at best.” In the op-ed, Camp notes only a few revenue raisers, including the “clean up” of carried interest, ending the infamous corporate jet tax break, and cutting the so-called “John Edwards” loophole, which allows certain self-employed people to avoid payroll taxes.

Although many details are still to emerge, there are some who are already criticizing the proposal. Steve Wamhoff, the legislative director of advocacy think-tank Citizens for Tax Justice, takes issue with the breaks in capital gains and dividends, which he calls “absolutely the worst possible thing in the tax code.”

“There’s a lot of smoke and mirrors involved, but if you just do the math and look at the bottom line here, basically he’s trying to get us back to the point where people who get their income from investment…to pay maybe the 15 percent rate which is what it was under Bush,” says Wamhoff. “We would say you got a major problem.”

Camp argues that his proposal would make the tax system more simple and fair, but he’ll have an extraordinary time pushing his proposal through Congress. On Tuesday, both Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell said it would be extremely difficult, with the latter arguing that Republicans would have to retake the Senate for there to be serious progress. That, of course, won’t be until after this fall’s elections, when Camp will have handed his gavel on to someone else.