By Bernie Becker and Peter Schroeder - 03/04/14 06:00 AM EST
The release of House Ways and Means Committee Chairman Dave Camp’s reform plan has highlighted a dramatic shift among Republicans on taxes.
Camp (R-Mich.) went out of his way to avoid giving the highest earners a tax cut in the comprehensive draft he released last week, a goal Republicans likely would have scoffed at a decade ago, after two rounds of tax cuts under President George W. Bush.
Republicans on the Ways and Means Committee acknowledged that Camp weighed political considerations while crafting his proposal.
“The last thing we wanted to do is raise taxes on the middle class and raise taxes on those on the lower end of the spectrum,” said Rep. Charles Boustany Jr. (R-La.), a senior tax writer.
“We have to recognize the environment we’re in today and the fiscal circumstances we’re facing.”
Camp had vowed for months that his plan wouldn’t shift the current tax burden away from the rich, even after Democrats secured a tax hike on the wealthiest in the “fiscal cliff” deal at the end of 2012.
While Camp actually followed through on that promise, he missed on another top GOP priority — reducing the top individual tax rate from 39.6 percent to 25 percent.
Instead, Camp says, less than 1 percent of taxpayers would land in a 35 percent bracket, a concession that underscored the challenge that the Ways and Means Committee chairman faced.
“I don’t like that 35 percent rate that we had to put in there,” Boustany said. “I don’t think any of us liked it. But to make the numbers work, we had to do it.”
Even some GOP tax writers who say politics weren’t the primary motivation behind those decisions acknowledge it played a role in how Camp’s plan taxes the rich.
“I think that there are some political hooks in the bill that will try to entice the Senate Democrats and the House Democrats,” said Rep. Kenny Marchant (R-Texas).
Camp’s draft has yet to gain much traction among either GOP leadership or the rank and file, and even his allies have tamped down expectations for legislative action.
But his efforts to keep moderate earners from financing a tax cut for the wealthiest fits in with ideas from other House GOP leaders, including Majority Leader Eric Cantor (Va.) and Rep. Paul Ryan (Wis.), who have also said they’re seeking solutions for the middle class.
Democrats say it’s a welcome step for Republicans to publicly back away from deeper tax breaks for the rich.
“That’s a significant break from ideology and practice. That is significant,” said Rep. Raúl Grijalva (D-Ariz.), a leader of the Congressional Progressive Caucus. “It’s their political response to income inequality, wage disparity, ‘the fix is in’ idea that’s in the minds of many Americans.”
But with Democrats trying to make the coming election about income inequality, aides made clear that Camp’s plan wouldn’t insulate Republicans from criticism that they’re too cozy with the rich.
Top Democrats have panned Camp’s draft for scaling back the Earned Income Tax Credit, a crucial incentive used by the working poor, and for targeting preferences for low-income housing.
Democratic tax writers add that they have long-term questions about how the tax burden would be distributed among taxpayers, which are similar to their suspicions that Camp’s plan would only add to the deficit outside the 10-year budget window. Democrats have insisted any tax overhaul include revenue for deficit reduction or other priorities.
Rep. Bill Pascrell (D-N.J.) said Camp might not have intended to give the wealthy a tax cut, but it could take “a good six months” to really understand the plan’s implications.
“We have yet to see how the 47 percent, Mitt Romney’s 47 percent, are going to fare under this,” Pascrell told The Hill.
Still, the early indications are that the tax cuts Congress passed in 2001 and 2003 were a far better deal for higher earners than Camp’s new plan.
A study from the Urban-Brookings Tax Policy Center from 2004 found that the top 0.1 percent of earners would see after-tax income climb by 7.5 percent after the Bush tax cuts. By contrast, the bottom 20 percent of earners would see incomes inch up by 0.3 percent.
Len Burman, the center’s current director, said it’s too soon to make those sorts of conclusions about Camp’s draft. But he also suggested the plan, which phases out core tax benefits for the highest earners, could lead to as much as a 67 percent effective rate for a select number of wealthier taxpayers.
“To get really substantive cuts in rates, you have to really slash some of these popular tax breaks,” Burman said, in reference to Camp’s scrapping or shrinking deductions for state and local taxes and mortgage interest. “There’s not that much revenue to be gained at the bottom of the distribution tables.”
For more liberal analysts, that’s part of the reason to not give Camp too much credit. They insist his plan to slash rates so aggressively was never feasible in the first place.
“They just ran into math,” said Chuck Marr of the left-leaning Center on Budget and Policy Priorities. “It’s very difficult to get the top rate down to 25 percent. You really need to hammer the middle class, and they just decided not to do that.”
Republicans, meanwhile, have yet to unify behind a tax policy for the working class. Ryan, for instance, praised the EITC on Monday in a new critique of federal anti-poverty programs, just days after Camp proposed shrinking it.
Rep. Patrick Tiberi (Ohio), another senior GOP tax writer, told reporters last week that, after Republicans get more acquainted with Camp’s draft, there will be “a natural push and a pull of what can be improved, what can be expanded, what can be lost.”