Some rates would go up under bill
Everyone talks about wanting bipartisan reform of our hideous tax code. But look at the frustrations that have befallen Rep. Dave Camp (R-Mich.), who has thrown his heart and soul into trying to get it done. Camp, chairman of the House Ways and Means Committee, has spent four years pushing for tax reform in various forums.
“There’s no purgatory for me, because I’ve lived it on Earth,” he quips, citing his service on the bipartisan Simpson-Bowles Commission and the bipartisan Super Committee, both of which accomplished … nothing.
Camp’s suffering continues with the Tax Reform Act of 2014, a project on which he and his Democratic partner from Montana, Sen. Max Baucus, spent years seeking a consensus to take away various tax goodies and in exchange produce lower overall rates and a simpler code.
This hasn’t happened since the stars miraculously aligned in 1986, producing the Bradley-Gephardt reform bill. Baucus and Camp modeled their approach on that, including hosting bipartisan burgers-and-beers at watering holes and distributing copies of “Showdown at Gucci Gulch,” a book about the 1986 reforms.
Why am I telling you about Camp and his travails? To put a human face on a dry, abstract topic. And to show you that although Washington is a mess, there are decent people there willing to do the right, bipartisan thing.
Alas, despite the burgers, beers and books, we won’t get tax reform this year. Odds against it were always high. They became astronomical when Baucus, head of the Senate Finance Committee, gave up his seat in early February to become ambassador to China. You can understand why he did that: He’s 72, his term is up, and he wasn’t going to run for reelection.
For reasons you’ll soon see, private equity, giant financial institutions and real estate interests, among others, attacked Camp’s bill, introduced Feb. 26. There are things in the bill to annoy almost everyone, which is why I like much of it — and why it deserves serious consideration, which it isn’t getting.
Camp’s bill proposes sensible things like taxing at regular rates, rather than at low capital gains rates, the “carried interest” piece of investors’ profits that buyout fund and hedge fund managers take. It also would enact a special tax on too-big-to-fail financial institutions, end deductions for state and local taxes, and restrict real estate tax breaks. The alternative minimum tax would disappear (yay!), and Camp would reduce the value of deductions for advertising and circulation expenses, both of which might hurt Fortune but are perfectly fine to me in a context of overall reform.
Camp, 60, announced in late March that he’s not running for reelection. He didn’t say why, but under House Republicans’ rules, he wouldn’t be chairman of Ways and Means in the next congressional session. That would greatly reduce his power to push through bipartisan reform. Nevertheless, Camp is soldiering on with his enterprise — which, understandably, he won’t concede is doomed. He is holding hearings, talking about how tax reform would spur growth, seeking consensus for change even as the impending November elections make doing anything substantive and bipartisan almost impossible.
Why keep going? “My main quality is persistence,” Camp said. He cites his days on the swimming team at Herbert H. Dow High School in Midland, Mich., where he grew up. He never won a race, he said, but his coach entered him in long-distance races because he would always finish.
That prompted me to call his coach, Herb Scogg. “Dave was a grinder,” Scogg told me. “He might be a lap or even two laps behind, but he never quit.” Scogg also told me something Camp hadn’t mentioned: that in his sophomore year, Camp was elected Dow High’s most valuable swimmer “because of the example he set for the team.”
Camp and Baucus did a lot of good, bipartisan work. Sure, we’ll never see Baucus-Camp enshrined next to Bradley-Gephardt. But someday someone may build on Baucus-Camp. Which might just reduce the pain of Camp’s tax purgatory on Earth.
Sloan is Fortune magazine’s senior editor at large.
Annual excise tax on $1 trillion financial institution
Proposed tax (which would be $525 million after being deducted at the proposed 25% corporate rate)
Maximum tax on carried interest
Current—25% (20% capital gains, 3.8% Medicare, 1.2% personal exemption phaseout)
Source: Ways & Means Committee