
The smarter Republicans are trying to reclaim the mantle of economic opportunity, and on Wednesday Dave Camp climbed into this phone booth by proposing a detailed tax reform. The Chairman of the tax-writing Ways and Means Committee wants to lower tax rates and create a fairer, more efficient code, and his plan ought to shift the debate over taxes to growth from redistribution.
The
American tax system has changed for the worse since the last reform in
1986, and Mr. Camp has spent three years learning about the dispiriting
specifics, including more than 30 hearings. The Michigan Republican is a
serious legislator who cares about policy, and his effort shows. We
disagree with many details in his 979-page bill, but overall his
direction is right. Even if his bill doesn't pass this year, its legwork
will inform any future reform.
***
The
heart of the Camp plan would collapse today's seven income tax brackets
into three, with about 99% of taxpayers paying 10% or 25%. The top
statutory marginal rate would fall to 35% from 39.6% for individuals
earning wage income over $400,000 ($450,000 for joint filers).
Mr. Camp would also simplify the tax code
whose 70,000 pages defy human comprehension and cost $168 billion
annually in compliance spending. The plan would sweep out this warren of
deductions, credits and interest group carve-outs and raise the
standard deduction to $11,000 for individuals and $22,000 for couples.
About 95% of taxpayers would no longer itemize, according to estimates
from the Joint Tax Committee, or JTC.
Mostly
this modernization involves consolidating redundant provisions like the
15 tax breaks for higher education or repealing the Alternative Minimum
Tax. For the record, Mr. Camp preserves the mortgage interest deduction
for all current loans and, for new mortgages, lowers the cap to
$500,000 from $1 million of mortgage debt. For the 5% of filers who
would itemize, the plan retains the charitable deduction for
contributions greater than 2% of income.
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