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House GOP tax plan faces long odds in election year

House Ways and Means Committee Chairman Dave Camp (R-Mich.)

House Ways and Means Committee Chairman Dave Camp (R-Mich.)

The Morning Line

With November’s midterm elections a little more than eight months away, most congressional Republicans would prefer to keep the focus on the botched rollout of the Affordable Care Act and President Barack Obama’s low approval ratings.

But in the case of House Ways and Means Committee chairman Dave Camp, the main objective for the moment is governing, not campaigning.

The Michigan Republican Wednesday is scheduled to unveil an overhaul of the country’s tax code that would sharply cut the top rate but impose a surtax on some of the wealthiest Americans.

The New York Times’ Ashley Parker breaks down the numbers in Camp’s bill:

Under the plan, the tax rate for about 99 percent of Americans would be, at most, 25 percent, but the remaining 1 percent, whose income is above $450,000 or so, would also be subject to a 10 percent tax surcharge on certain types of income, according to congressional aides. The surcharge would affect salaried professionals, like lawyers and accountants, while excluding those whose income comes from industries that produce goods, like manufacturing and farming.

The current top tax rate for individuals is 39.6 percent. Under the new plan, the seven existing tax brackets would be collapsed into just two — at 10 percent and 25 percent, according to congressional aides.

Politico reports the proposal also includes changes to the mortgage deduction and tax breaks for research and development:

At the same time, lobbyists who have seen the proposal say it will cap the deduction for home mortgages at $500,000 from the current $1 million cap — a controversial idea sure to set off a fierce lobbying campaign by home builders, Realtors and others. It also changes a popular tax break for research and development — requiring amortization rather than immediate write-offs for certain expenses, including advertising.

There were already signs Tuesday of the difficult road ahead for the proposal, with the top Republican and Democrat in the Senate both throwing cold water on the measure’s prospects.

Asked whether he thought Congress should tackle tax reform this year, Senate Minority Leader Mitch McConnell, R-Ky., responded, “I don’t see how we can, because the majority leader and the president have said they want a trillion dollars in new revenue for the federal government as a condition for doing comprehensive tax reform, which we know we ought to do.”

McConnell added: “Now, if we had a new Republican Senate next year, coupled with a Republican House, I think we could have at least a congressional agreement that this is about getting rates down and making America more competitive, you know, not about giving the government even more revenue. So I have no hope for that happening this year.”

Senate Majority Leader Harry Reid, D-Nev., blamed Republicans for preventing lawmakers from dealing with the issue sooner.

“The truth is, we should have tackled tax reform years ago,” Reid said. “It will be extremely difficult — with the obstruction that we get here from the Republicans on virtually everything — to do something that should have been done years ago.”

Reid noted that Democrats were taking a fresh look at Camp’s effort now that his negotiating partner in the Senate, Max Baucus, has left the chamber to become U.S. Ambassador to China. Oregon Democrat Ron Wyden has succeeded Baucus as chair of the Senate Finance Committee.

The Washington Post’s Lori Montgomery writes that Camp must first make the sale with his GOP colleagues:

Even many Republicans have grown leery of Camp’s proposal, worried that any simplification plan would have to trim popular tax breaks such as the deduction for home mortgage interest — a disadvantage in an election year.

Republican leaders have not ruled out the possibility of bringing Camp’s legislation to a vote before the full House if it gains momentum — but they haven’t made any promises, either.

Meanwhile, the White House continues to show little interest in a comprehensive tax overhaul. While cutting the corporate tax rate from its current 35 percent remains an Obama priority, administration officials have dismissed reform of the individual code, saying it would be mathematically impossible to lower the top rate paid by the wealthy, protect the middle class and achieve Democrats’ goal of raising fresh cash to shrink chronic budget deficits.

The challenge of squaring those differences in an election year seems unlikely, especially considering the initial wave of reaction Tuesday. But with Camp’s chairmanship of the Ways and Means Committee set to end after the current term, he does not have the luxury of waiting until next year. By releasing his proposal Wednesday he can elevate the issue at least for a time, and provide a test run for what support there might be for tax reform after the campaigning is finished.


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Ruth Tam contributed to this report.

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