Tax Reform Faces Long Odds Even With Dave Camp at the Helm

Nancy Cook
National Journal

Tax reform remains a long shot this fall—just as it always was before, during, and after Republican Rep. Dave Camp flirted with a run for a U.S. Senate seat.

The House Ways and Means Committee chairman announced Friday that he would not run for the Michigan Senate seat, and immediately, the question arose: What, if anything, does it mean for tax reform this fall if Camp does not have to devote major time to campaigning?

Not as much as you might think. Tax reform faced many, many hurdles regardless of the direction of Camp's future political career. Here are a few to think on:

Revenue: Neither party can agree on how much money any overhaul of the tax system should raise. Democrats want to raise additional revenue to either fund stimulus-like programs or to pay down the deficit. Republicans think tax reform should not raise any more money than the code currently does. Forget finding a compromise on a lower corporate tax rate between the two parties. This is a major philosophical sticking point and one of the biggest impediments.

Little support from leadership: Republican House Speaker John Boehner has said that he has reserved a bill specifically for tax reform; that's a nice symbolic gesture to support his old friend Camp. But Boehner is not exactly out there selling any specific tax plan to eliminate tax deductions or clean up the code.

The Senate leadership expresses even less enthusiasm. Majority Leader Harry Reid refused to participate in the Senate's top tax writers' exercise to examine the tax code. (The Senate Finance Committee leaders had asked lawmakers to defend their favorite tax breaks in private letters, but Reid refused to play along and publicly dissed the process to reporters). A number of top Senate Republicans similarly urged their members to not even wade into tax reform until the revenue question (see above) was settled.

House Democrats: Camp has promised to unveil a tax reform bill within the Ways and Means Committee this fall, but it will be hard to make that appear broadly palatable unless some House Democrats on the committee support it. Tax lobbyists in town are closely watching this process of courting House Democrats. So far, none have publicly signaled their support for a Camp bill. If they don't, this easily could look like a partisan Republican exercise—another possible killer of tax reform.

Risk to the GOP: And, if few or no House Democrats support Camp's tax reform draft legislation, then the Republicans run a major political risk. If they propose, for instance, cutting the corporate tax rate and paying for it by slashing some tax deductions near and dear to Americans, then they'll look like friends to major corporations and wealthy people. That playbook did not work well for Mitt Romney, when the Democrats used it against him in last year's presidential campaign.

Add all of this up and it reinforces the political difficulty of passing a major tax-reform package in the next year or two, even with all the time and attention Camp can now afford to lavish on the project.