Camp’s plan also simplifies the tax code by allowing millions of tax filers a larger standard deduction, which means they can forgo the hassle of itemizing deductions and go straight to the EZ form. For those who do itemize deductions, many of the carve-outs will be gone — but not the mortgage or charity write-offs.
Expect the White House to lambast this plan as a “tax cut for the rich,” but history shows that lower tax rates are usually associated with higher overall tax receipts and more taxes paid by the rich. In the 1980s after two rounds of Reagan tax rate reductions, income tax receipts doubled, and the share of taxes paid by the top 1 percent, 5 percent, and 10 percent rose as the economy expanded.
This is an important history lesson. Now, congressional revenue estimators are using “dynamic scoring” to estimate what happens to the economy and revenues if the new plan is implemented. This yields a “growth dividend” for the economy of at least $700 billion, our sources tell us.
The U.S. economy has slogged along at just a little over 2 percent growth during this recovery — and last year, less than that. Imagine 4 percent growth for the next decade, and you’ve added nearly $2 trillion more in tax revenues to pay the government’s bills.
I’d prefer to see something closer to a pure flat tax with one tax rate, a postcard-size return, and no double tax on saving and investment. And there are some bad ideas buried in the Camp plan, such as a tax on the assets of big banks that received bailout funds in 2008-09.
But on balance, this is a gutsy first attempt to take on the beehive of special interests in Washington and grow the economy while making the tax system fairer and more comprehensible.