WASHINGTON — House Ways and Means Committee Chairman Dave Camp told Republican colleagues in an email that he plans next week to release a "comprehensive discussion draft" to overhaul the tax code.
Some experts think the proposal could be released Wednesday.
The plan would "overhaul our tax code to make it: (1) simpler and fairer for families and employers, and (2) strengthen our economy - meaning higher wages and more take home pay for the American worker," the Michigan Republican told members of his party on the committee.
In the past, Camp has said that he wants tax reform to be revenue neutral and to lower the top individual and corporate tax rates to 25%. He may or may not reach that target, but congressional observers expect Camp's draft will propose to lower rates.
"If he's going to bring the corporate and individual rates down significantly, I think there's implications for municipal bonds," said Susan Collet, senior vice president of government relations for the Bond Dealers of America. That's because substantially lowering rates while having revenue-neutral tax reform can only be achieved by cutting many exemptions, deductions and preferences, which could include the tax-exemption for munis, she said.
"[Camp] has maintained for a long time that everything's on the table," Collet said.
At a hearing in March of last year, Camp appeared to show interest in changing private-activity bond rules, and the proposal Camp releases could include additional restrictions on issuing tax-exempt PABs, said John Godfrey, senior government relations representative for the American Public Power Association.
Since there's not a lot of revenue to be raised just from making changes to PABs, Godfrey said he's also worried there could also be changes to the tax-exemption for munis. Taxing municipal bonds can be attractive for some federal lawmakers because doing so shifts costs to states, he said.
"It is buying your dinner with somebody else's credit card," Godfrey said.
Experts in the muni market said they do not believe there are current plans for Camp's tax reform draft to be voted on by the Ways and Means Committee any time soon. Camp said he is releasing the draft to move the conversation about tax reform forward. "We can choose to have a real discussion about what tax reform can mean for American families and employers or we can choose to cower to special interests and maintain the status quo," he said. "Clearly, I choose the former." The Joint Committee on Taxation will give a "dynamic analysis" of his plan, and the director of the Congressional Budget Office is also willing to provide this type of tax-reform analysis, Camp told colleagues. Dynamic scoring would take into account the economic behavior that would result from a proposal when estimating the revenue change.
