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Tax reform plan readily available

Thu., March 30, 2017

The following editorial is from the Washington Post.

In the wake of the failure by Republicans on Capitol Hill and in the White House to get an Obamacare repeal-and-replace bill off the ground, Treasury Secretary Steven Mnuchin sounded an optimistic note about President Donald Trump’s next big project, tax reform.

Overhauling the nation’s convoluted, inefficient internal revenue code, he said Friday, would be “a lot simpler” than overhauling its sprawling health care system. At which much of Washington rolled its eyes. After all, the same interplay of interest-group conflict, policy complexity and partisan ideology that undid GOP health care efforts would seem to apply to tax reform. The intra-Republican battle over the House’s main new idea – a de facto tax on imports to pay for corporate tax relief – is a case in point.

Still, in one sense Mnuchin may be right. Unlike health care, the subject of a comprehensive bill under Trump’s predecessor which only recently took full effect, the tax code was last given a top-to-bottom fix in 1986. It’s overdue. Moreover, in the past decade or so, problems, such as internationally uncompetitive corporate taxation, have become more salient. And numerous detailed plans for fixing them have emerged from experts on Capitol Hill in both parties.

In short, the legislative shelf is full of policy options from which to choose, if Mnuchin would rather avoid the time-consuming exercise of making his own from scratch. That’s certainly what we would do in his position. For example, in 2014, then-House Ways and Means Committee Chairman Dave Camp, R-Mich., drafted a bill that would have reduced the top corporate rate from 35 percent to 25 percent and replaced the seven marginal rates for individuals with three: 10 percent, 25 percent and 35 percent. The lower rates would have been paid for by eliminating or reducing certain long-standing tax breaks, such as the mortgage-interest and charitable deductions.

Accordingly, the congressional Joint Committee on Taxation scored Camp’s plan as revenue-neutral; that is, it neither increased nor decreased the budget deficit. Camp (now retired) included sweeteners for Democrats, with whom he consulted extensively: His plan targeted the notorious special treatment of “carried interest” for hedge-fund managers (something Mnuchin also favors), as well as a break for corporate jets, which was a pet issue of President Barack Obama.

There were objectionable aspects to Camp’s plan. It retained favorable treatment of investment income for top earners, a major source of the growing rich-poor gap. Yet even some top Democrats considered it “a credible effort,” as then-representative, now senator, Chris Van Hollen, D-Md., said.

Now, though, the GOP is the governing party, and it’s in a major policy and political jam, which can be escaped by offering plausible plans with at least potential bipartisan appeal. We wonder how many Republicans remember that their erstwhile top tax-law writer bequeathed them a proposal that fits that description. It is right there on the shelf, waiting.