Despite concerns, GOP leadership has allowed the tax reform bill to proceed. Republicans fret over tax reform

It should be a moment of uncontrolled glee for House Republicans: The chamber’s top tax writer Wednesday will release his vision for reforming the antiquated 7,000-page code.

Instead, many of them are fretting.


From moderates to conservatives, senior Republican aides to rank-and-file legislative hands, there are serious concerns about Ways and Means Committee Chairman Dave Camp’s plans to unveil politically sensitive plans to restructure the Tax Code just a touch more than eight months before Election Day.

It’s not that Republicans have soured on tax reform — in fact, it was one of the only areas of agreement at the party’s retreat last month.

( Also on POLITICO: Camp defies skeptics, plans tax bill)

But, put bluntly, Republicans think they will expand their majority in the House — and perhaps take the Senate — by spending the remainder of 2014 concentrating on a still struggling-economy, cutting a raft of regulations and Obamacare’s woes. Many senior figures see no need to open up a new policy discussion in February of an election year without a partner in the Senate and White House. And after specific details were revealed, it seems like they may rankle Republicans even more.

More than a dozen skeptical lawmakers and senior aides told POLITICO they thought it was a strategic blunder to unveil a plan outlining which loopholes to cut, whose rates will be slashed and which sector of the economy will see higher taxes when there’s little expectation the code will be reformed in 2014.

“I’m for the concept of tax reform, but many of us have concerns about releasing a plan, considering the likelihood of enacting it this year,” said Rep. Patrick McHenry (R-N.C.), a nine-year congressional veteran who heads candidate recruitment for the National Republican Congressional Committee.

House Democrats think they’ve been handed a gift: In a Monday afternoon meeting of Democratic Ways and Means Committee staffers, aides emphasized they shouldn’t criticize the tax reform bill but, rather, allow Republicans to trip all over themselves.

( Also on POLITICO: IRS headaches mean pain for taxpayers)

For Camp, it’s a dream come true. Every Ways and Means chairman’s goal is rewriting the Tax Code — and Camp doesn’t have much time left, as he is in his last year with the gavel. Figures in Camp’s orbit say Republicans have paid plenty of lip service to tearing up the code, and they think it’s far past time to dive in. Skeptics say talking about tax reform is a lot easier than releasing plans to get it done.

“Making the code … simpler and fairer so the economy is stronger requires a serious and deliberative approach, and the committee has worked to develop a plan that reflects that goal,” a GOP committee aide said.

But when the text is released, Republicans might be surprised. The draft, which was described to POLITICO by several sources involved, includes a number of Democratic tax principles but won’t receive much Democratic support.

For example, big banks would see an additional tax to offset the bailout they received during the financial crisis — a levy with origins in the White House. Financial lobbyists expect that tax to hit only the largest banks and insurance companies, those with assets of more than $500 billion — which makes it even more controversial among conservatives.

The draft also maintains much of the code’s current progressivity — essentially, the distribution of taxes paid will remain equal to income level. That’s a leftover from Camp’s talks with former Senate Finance Committee Chairman Max Baucus (D-Mont.). The plan also includes mark-to-market accounting — a way to tax the gain on stock options based on current value, no matter if they’re sold or not.

The Washington Post, citing a report from the Joint Committee on Taxation, also reported that the proposal includes a 10-percent surtax on the nation’s wealthiest earners, which is also sure to anger Republicans.

“It’s a negotiated bill without the other party having showed up,” one House Republican told POLITICO.

But Camp did achieve some of his top-tier goals favored by Republicans.

Under his plan, the top income tax rate would be cut to 25 percent from 39.6 percent and effective rates on most capital gains and dividends would be reduced by exempting 40 percent of the income from taxation and eliminating the top 20 percent rate on long-term gains, according to the JCT report cited in the Washington Post and the Wall Street Journal.

These concerns, which are being voiced to GOP leadership, explain why the road to releasing a draft has been long. It’s a shift for Speaker John Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.), who put the brakes on rewriting the code last year.

But in recent weeks, it became obvious that Republican leadership had to allow Camp to proceed. Last month at the GOP retreat in Cambridge, Md., member after member approached a microphone during a planning session to advocate for tax reform. When they got back to Washington, GOP leadership realized it was time to greenlight Camp’s priority.

Camp, a 23-year veteran of Congress, then worked K Street and conservative groups to whip up support. Camp reached out to the Alliance for Competitive Taxation — a pro-reform group that is seeking tax rates near 25 percent — to ask for their support. He’s dispatching two deputies — Sage Eastman and Warren Payne — to the U.S. Chamber of Commerce on Friday to provide a private detailed briefing of the draft. And on Tuesday, Camp will meet with The Wall Street Journal’s editorial board in New York, according to sources familiar with the committee’s strategy.

“We don’t even know what to say about the proposal because we don’t even know what it is. There are plenty of people out there who would like to help him by saying ‘we support you’ but we can’t because we don’t know it,” an official with one of the main tax reform-focused groups said, speaking without attribution to discuss the sensitive process.

They’ll need to work over their own members, as well. Ways and Means Committee lawmakers — who have primary jurisdiction over taxation — are privately peeved that they haven’t seen a full version of the bill just days before it will be released to the public. Late in 2013, however, they sat through marathon sessions that informed the draft.

An aide said: “The committee has taken an inclusive approach with members and it’s certainly [a] different approach than other chairmen on other legislative efforts, and that appears to have resulted in members really having an opportunity to shape the draft.”

Even supporters concede it’s going to be tough to squeeze a bill through.

“I’m for putting out reform — I have no problem with doing it now,” said Rep. Devin Nunes (R-Calif.), a member of the committee who is supportive of the process. “I’m of the belief that we should put out plans to fix the nation’s biggest problems — and tax reform is one of them. We’re on better ground if we have those plans. Moving legislation becomes a much more complicated question.”

In the coming weeks, Camp will sit down with groups of lawmakers to explain the process and detail his plans for the next few months.

“The rest of the House [Republican] Conference needs to see what we’ve actually done,” said Rep. Charles Boustany (R-La.), a supporter of Camp’s efforts. “It’s easy to say you’re for tax reform until you see the details. We’ll put out details and want to hear from our House leadership.”

But there could be an upside in failure, Republicans say.

Camp is in his last term, but in the wings is Rep. Paul Ryan (R-Wis.), who is the chairman-in-waiting. He could use this process to carefully watch how House Republicans react to the items in the draft and adjust when he takes the gavel.

And flagging support could help open the door to reviving tax extenders. GOP sources say the committee will consider renewing some lapsed tax provisions important to corporate America. For now, Camp doesn’t want Congress to consider tax extenders outside the context of broad tax reform.

All of the carping underscores the risks associated with even talking about big-ticket legislating in an election year in a polarized Congress.

“We’re going to welcome criticism … and comment,” Boustany said. “The timeline has continued to slip, and it’s a very difficult political environment — it’s very tough to get anything done. Putting a draft out there will show the Senate the work we’ve done. … It will also show substantially what we’ve done to the executive branch. We’ll see what type of commentary comes out and continue to push to see if we can get any type of traction. But realistically, if it doesn’t have the president on board and the Senate it will be difficult to enact anything into law.”

CORRECTION: Corrected by: Alysha Love @ 02/25/2014 01:12 PM CORRECTION: A previous version of this report misstated the number of pages in the tax code. It's a 7,000-page code.