The Tax Reform Act of 2014

That's the working title of the Camp tax reform proposal, even though legislation has yet to be marked up.  A few highlights for high-income taxpayers gleaned from Tax Notes:

• The mortgage interest deduction is retained, but capped at $500,000 for new mortgages.  Seems fair.
• The deduction for state and local taxes is eliminated, because it is a tax subsidy to the big government states, at the expense of the small government states. Sounds great, very fair, even though I live in super-high tax Connecticut.
• The charitable deduction is retained, but only to the extent the donation exceeds 2% of AGI. I would repeal this deduction, but this is a good start.
• The special maximum tax rates for long term capital gains are eliminated, replaced by a 40% exclusion from income.  The 3.8% Obamacare surtax on net investment income is, according to JCT, not affected by this change.  Does that mean the exclusion is added back to AGI for high-income taxpayers for calculating that tax?
• There are two individual brackets, 10% and 25%, plus a 10% "surtax" that applies at the income levels that have a 39.6% tax rate now.  Why not just have a 35% bracket and be done with it? Because the definition of what's taxable for the surtax is different from "taxable income."
• In a far-reaching change, tax-free muni bond interest would be subject to the 10% surtax.  So, the implicit subsidy would be reduced, that tax benefit is capped at 25%.   President Obama has already proposed capping the benefit at 28%.  Still, there's going to be furious pushback on this one, because it will increase costs for new state and local borrowing. Which is the right result--maybe they'll do less of it.
• No changes at all to estate and gift taxes.

I like the Camp proposal more than I expected.  I hope that it's analogous to the Kemp-Roth Tax Act proposal that Carter rejected and Reagan campaigned for, which led to  the Economic Recovery Tax Act in 1981.  Because we really could use another economic recovery right now.