Past the Tipping Point?
According to Merriam-Webster's online dictionary, the term tipping point was first used in 1959, and means "the critical point in a situation, process, or system beyond which a significant and often unstoppable effect or change takes place."
With less than three months before what may be the most important election in America's history, it's worth looking at one of the important topics of the elections. Especially since there is so much talk of fiscal cliffs, tax increases, and Taxmageddon. See, for example, our growls on April 18 and May 7, 2012.
That said, the Wall Street Journal's weekend interview today is very timely. The Journal's Stephen Moore interviews Dave Camp (R-Michigan), chairman of the Ways & Means Committee in the House of Representatives, and asks whether tax reform is politically possible. According to the Journal, Camp "may be the last optimist in Washington, but the House Ways and Means chairman says the need for faster economic growth and some cultivated bipartisanship can fix the tax code."
Moore notes that Camp is looking to the 1986 tax reform act as the model he hopes to use, "one of the true bipartisan triumphs of modern times, passing with 97 Senate votes, including those of current Senate Democratic leaders Harry Reid and Charles Schumer." More importantly:
"The 1986 tax reform eliminated most special-interest deductions and loopholes, lowering the top income-tax rate to 28% from 50%. Harvard economist Dale Jorgenson says the gains to economic growth from the lower rates and the simplified code increased GDP by more than $1 trillion, and that a similar reform now could increase national wealth over the long term by $7 trillion in net present value.
"But in the 1990s and 2000s Congress began tinkering again, a lot of the junk removed from the code "has been put right back in," and tax rates started rising. Mr. Camp's calculates that "we've made 5,000 changes to the tax code just in the last 10 years." He says the whole system is so complicated that even the corporate lobbyists who form long lines outside his office seeking tax favors "are now telling me, 'Please fix the code. Give us less paperwork and a 25% rate and we'll gladly give up our loopholes.'"
Moore concludes this lengthy interview, but well-worth reading in its entirety, by writing:
"Mr. Camp is contemptuous of the Democratic inclination to "demagogue every Republican proposal," such as last year's Democratic television ad showing a Republican tossing an elderly woman in a wheelchair off a cliff. He dismisses out of hand the standard Democratic fix of squeezing doctors and hospitals on reimbursement rates: "This only exacerbates the problems and makes it more difficult for seniors to find Medicare physicians who'll treat them."
"With a $16 trillion debt and trillions more in unfunded liabilities embedded in these programs, does he think it is getting too late? "I'm an optimist, I think we are still at a point where if we act, we can address these problems before it's a situation like Europe. They may be past the tipping point."
"The trick for Mr. Camp to realize his dream of creating a pro-growth, comprehensible, 21st-century tax code is not just to get Democrats to agree to lower tax rates, which will be hard enough. Even tougher may be to get Republicans to give up those popular deductions and carve-outs that many in the middle class and Chamber of Commerce have come to regard as rights."
Kudos to Mr. Moore for a most informative interview with Dave Camp from northern Michigan's 4th Congressional District.