Reforming America’s tax code

January 7, 2013

In an interview with Ernst & Young, Dave Camp, the Chairman of the House Ways and Means Committee, says the path to successful tax reform in the United States requires input from business.

T Magazine: There seems to be a growing consensus on the need for changes in the US tax system. When you talk to your colleagues in other countries, what do they say about the current state of US tax law?

Dave Camp: They’re dumbfounded! They’ve made a lot of the reforms that we need to make, so they kind of look puzzled, like, “Why aren’t you doing this?!” So you’re trying to explain the lack of action here a lot of times.

They’re doing it — they’re reforming their codes, they’re simplifying, they’re lowering rates because they know that if they can attract those high-paying jobs, their economies will do better, the government revenues will go up and they’re going to be able to meet the needs of their citizens.

How do you envision getting to a significant reduction in the corporate tax rate with a constraint of revenue neutrality?

Well, the 25% rate is obviously our goal, and we’re going to have to go through and look at all of the various tax provisions and understand the impact of making those changes to the code.

If we can get a tax code that meets that goal, we believe there will be a pro-growth element to that and you’ll actually see revenue to the Government.That’s been the case in every tax reform that’s occurred, whether it was the Kennedy years or the Reagan years, and I believe that could happen again.

How should US tax reform affect inbound investment?

We need and want more of it. Plain and simple. I want the United States to be the most attractive place in the world for capital investment. And what we are hearing from foreign-headquartered companies with US operations is that the best thing we could do is lower our corporate rate.

Are there particular insights that you see to be gained from the choices that other countries have made in their international tax approaches?

We’ve tried to get insight into what other countries are doing, but that doesn’t mean we’re going to mirror them because we have our own unique challenges and our own unique economy.

But I do think it’s very important to get that sort of understanding because that’s who we’re competing with. So we do have to have some sense of what’s working, and why, in other parts of the world, but we’re going to need to design a uniquely American tax system for us.

What do you see are the benefits of undertaking international tax reform on a revenue-neutral basis?

I think if you have one section of tax policy being used to pay for another section of tax policy, it would be very hard to get consensus on the sorts of reform you need. This is all about “How do we get our economy moving again? How do we get job growth in the United States and how do we get people back to work?”

And one of the ways you do that is not have an antiquated, outdated tax system that actually penalizes the kind of job growth that might occur in the United States by bringing dollars back. But we have to understand that not every country has our rules, so there does need to be some sense of dealing with the base erosion issues.

We’ve got a number of ideas out there and we’ve not settled on one, and we’re still getting input; we got more feedback in the committee as late as yesterday. So it’s a very important area — it’s an important area to get right — and that’s why I think it was very important to get out there early, in a more detailed way, and give those affected stakeholders an opportunity to come back with feedback.

Your international tax proposal has advanced the debate by providing details that allow businesses to do both qualitative and quantitative analysis of the potential impact of the proposed changes to their operations. What should businesses be doing to keep this dialog going as your work advances?

Well, we want those evaluations and thoughts. Again, we’ve got really good people on the committee — good members, great staff on the committee — but we can’t possibly know the nuances and complexities of every business in America as those who own and operate them and are employed in them do. So we’re trying to understand what’s going to work.

This is all about trying to get the best tax code in the world for the United States so that we can be the number-one economy, we can have the best credit rating, we can have the highest job growth, we can have the highest GDP growth. And the result of that is that those benefits will extend to people, with more jobs, higher income and more prosperity. That’s what this is all about.

In thinking about the legislative path for tax reform, do you think that tax reform is separable from entitlement reform and deficit reduction?

I do. I think they’re all critical issues facing our nation, so I’m not trying to minimize the others, but I do think you can do tax reform on its own.

I think if you try to make tax reform about reducing the deficit, it makes it much harder. I think tax reform should move on its own, in a comprehensive way, and not be seen as a path to reducing the deficit or balancing the budget.

What is your thinking on VAT these days?

I don’t see it having viability. Having said that, I’m not going to foreclose any discussion but I don’t personally see it as a viable alternative.

It’s been rejected 97-0 in the Senate, it’s never been popular and I don’t see it as really an alternative. But I’m not going to foreclose anyone else in terms of discussing that issue, and I think a good example of that is a 2011 hearing we had on alternative systems of taxation.

About Dave Camp

Congressman Camp is one of the most influential policymakers in the US, as the head of the committee helping to set the country’s economic, health care and social welfare policies. The Ways and Means Committee has sole jurisdiction over tax policy in the House of Representatives.

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