Citing Economic "Alarm Bells," Camp Pushes Tax Reform
Carl Cannon spoke with Michigan Congressman Dave Camp about his efforts to push tax reform as chairman of the House Committee on Ways and Means
A contracting economy, the highest corporate tax rate in the world and more young adults than ever living at home with their parents are among the many “alarm bells” that should make reforming the tax code a priority, according to Michigan Congressman Dave Camp.
Speaking at a job growth and tax reform event hosted by RealClearPolitics on Thursday, Camp spelled out flaws in the federal tax code and argued for simplifying it.
As chairman of the House Committee on Ways and Means, the Republican congressman introduced the “Tax Reform Act of 2014” earlier this year with the goal of “lowering tax rates while making the code simpler and fairer for families and job creators.”
“The American people are being left behind,” Camp said Thursday. “The complexity [of the tax code] makes people really think that, ‘You know what, the next guy is getting a better deal.’ That is something that is really fundamentally wrong.”
Camp said one of the biggest issues with the U.S. tax code is that it is the only one in the world with large pieces that expire. He argued this creates uncertainty for businesses and hinders their ability to plan their investments. Camp pointed to the research and development tax credit, which is currently expired, as an example. Camp said the credit has previously been given two-year extensions, backward one year and forward one year.
“In a year, business people are asking, ‘What is going to happen to the research and development tax credit?’” Camp said. “It is absolutely the wrong approach.” “If we are going to extend things every two years -- for 12 years, 14 years, 16 years -- let’s just be honest and make it permanent law.”
Camp is also troubled by the U.S. corporate income tax rate, which is currently the highest statutory rate in the world at 39.1 percent. He said other countries have cut theirs in half, while the U.S. has increased its rate after having one of the lowest in the 1980s.
“We have got to find a way where we can compete on the business side so that our U.S. companies can platform here in the United States and compete around the world,” he said.
The Republican congressman also pointed to the current economy as another reason to reform the tax code. He referenced the contracting economy -- with gross domestic product decreasing by 1 percent in the first quarter of 2014 -- and the decline of real wages, which reduces purchasing power.
He added that more young adults are living with their parents than ever, as a poor economy has “put their lives on hold.” A Pew Research study found that 21.6 million, or 36 percent of young adults ages 18-31, were living in their parents’ homes in 2012.
Camp’s proposal would eliminate more than 220 sections from the tax code, reducing the size of the income tax code by 25 percent, according to the Ways and Means Committee website. The tax system would be collapsed into two brackets of 25 and 10 percent. The proposed overhaul would also cut the corporate tax rate to 25 percent.
Camp added that his plan would grow the economy by 20 percent and would create two million jobs. The Joint Committee on Taxation found the simplified code could bring an additional $1,300 per year to middle-class families.
“We can lower rates and grow the economy,” Camp said. “I think we should all be somewhat concerned with the direction of our economy and the lackluster economy. We are not going in the way that we need to go.”
The JCT also scored Camp’s plan as being distributionally neutral, meaning it does not significantly change the average rate or share of taxes for each income group. The plan would also generate up to an additional $700 billion in tax revenue over the next decade as a result of higher wages and employment.
The Tax Reform Act also addresses loopholes. For example, section 3101 of the proposal would eliminate current-law loopholes for corporations that “engage in transactions involving their own stock.”
Congress, however, has been hesitant to make the expiring code permanent. Camp said he thinks a major reason is because members are looking forward to their next election.
“I have always thought that good policy makes good politics, and I am not afraid of issues,” Camp said. “I think the American people really expect us to do more than warm a chair up here and wait for the next cycle.”
Camp also addressed the ongoing IRS scandal at Thursday’s event. He described the targeting of conservative groups as “un-American” and said he believes involvement goes far beyond a group of low-level employees from the Cincinnati office.
“I think everything that has been uncovered is very disturbing,” Camp said. “All the narratives that have been put out on this have proven to be false.