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Over the past week, three senior Washington lawmakers released foundational documents that describe both their agendas and their perspectives on government. On one level, they paint vastly different pictures. Yet, a close reading also pinpoints some surprising and important areas of agreement—more perhaps than the players would publicly admit.
President Obama’s fiscal year 2015 budget is hot off the presses. His tax and spending blueprint released today would boost revenues by about $1 trillion over the next decade, with the new money divided between funding new programs and reducing the deficit. As the president predicted in his State of the Union address, his budget focuses on improving the economic well-being of the middle-class. And he’d fund many of those initiatives by raising taxes on high-income households.
Obama’s plan also includes what he describes as a revenue-neutral business tax reform aimed at both small firms and big multinationals. The details of the proposal are not too different from what he laid out last year.
But Obama’s budget was not released in isolation. Yesterday, House budget Committee Chair Paul Ryan (R-WI) released a 205-page report on the federal government’s anti-poverty programs. It was, for the most part, a scathing criticism, though even it found a bit of common ground with Obama, especially when it comes to the Earned Income Tax Credit—which both like.
The document serves as something of a roadmap for Ryan’s future agenda. The Wisconsin lawmaker wants to be the next chair of the House Ways & Means Committee, which has jurisdiction over many of the programs he so dislikes. He’s also mentioned as a possible 2016 presidential candidate.
Yet, Ryan’s report was only a critique of existing programs. It made no recommendations on how to reform any of the poverty programs that Ryan believes have failed, though his upcoming budget plan may include some.
Finally, there was the tax reform plan House Ways & Means Committee chair Dave Camp released last week. Camp’s proposal, far different in tone and substance from Obama’s and Ryan’s volumes, was a painstaking, item-by-item rewrite of the tax code.
Whether you agree with his proposals or not, give Camp credit: For the most part he didn’t flinch from the dirty details. He identified exactly which popular tax subsidies he’d kill and described just how he’d do it. Unlike many recent tax reform plans, he didn’t hide behind the black box of unidentified “loophole closers.” He gored an entire herd of oxen and as a consequence has been largely abandoned, even by his own party leadership.
Yet Camp also shares common ground with Obama on a wide range of tax issues. Both back business tax reform and both would raise taxes on hedge fund managers. Both would cap the value of tax deductions for high-income families—Obama at 28 percent and Camp at an even less generous 25 percent. The two men would close a loophole that allows owners of personal service firms to dodge self-employment taxes. And both would pay for infrastructure spending with some temporary tax revenues they’d generate from rewriting business taxes.
This does not mean they are ready to sing kumbaya together. In important respects, Camp and Obama’s approaches to tax policy are vastly different. Obama wants to raise taxes overall and Camp wants to keep revenues the same as under current law. Obama would boost taxes on the rich while Camp wants everyone to pay roughly the same share of tax they do now. Obama wants to fund new spending. Camp does not (except for his infrastructure piece). Obama largely protects special interests favored by Democrats while Camp is not shy about zapping some GOP favorites.
And both men were constrained by political reality. Obama’s budget was written with the 2014 congressional elections in mind, which explains why he backed off proposals such as one to limit increases in Social Security benefits. Camp had to design a tax code that would raise roughly as much as current law and set a top individual tax rate of 25 percent. In the latter he ultimately failed, but it forced him to rely on an unsettling number of gimmicks to make it look as if he had met the goal.
Still, the plans show there is the potential for consensus in Washington on some narrow, but important issues. Not cosmic tax reform, perhaps, but meaningful change. There is a middle ground, even if few politicians are interested in playing on it.
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